Will Europe steal a march on the City?
22 February 1999
22 October 2013
10 February 2014
5 September 2014
14 March 2014
12 June 2014
Judith Mayhew, chairman, Wilde Sapte
Alan Peck, chief executive, Freshfields
Dorothy Livingston, partner, Herbert Smith
Might the City be about to lose its position as the world's leading financial centre to Paris or Frankfurt?
According to the report Le Prix de l'Euro, published last week by an independent financial think-tank, factors ranging from the growth in electronic trading through to the European Monetary Union are tightening the competitive thumbscrews.
In addition, both Paris and Frankfurt are heavily marketing themselves abroad as the future financial capitals of Europe. Meanwhile, London has a looser collection of departments and bodies to promote the City's wares. How does all this impact on lawyers?
Judith Mayhew, Wilde Sapte lawyer and chairman of the Corporation of London's policy and resources committee, says:
"It's vitally important for lawyers that the markets stay in London. On the City's future, I think there are always dangers when you are the number one. London does 47 per cent of Europe's wholesale financial business, and so there are economies of scale, which means that transaction costs are lower than anywhere in the world. No other centre rivals that, and this helps us compete directly with New York."
But what about the marketing issue? "I don't think you need one single body. The City is a truly international centre, rather than domestic like Paris or Frankfurt, so the job of marketing it is more complex. We have good co-operation between the corporation, Bank of England, Financial Services Authority and Treasury, although one can always ask for greater resources."
Lawyers can help in this, Mayhew believes, by "making London a centre for international arbitration that can compete with the International Court of Arbitration in Paris. This is one area where we are losing out. City law firms are very good on deals and litigation work, but London is more fragmented when it comes to arbitration."
Alan Peck, chief executive of Freshfields, says: "It is difficult to tell how well the City is being marketed because one is on the inside looking out. One gets the impression that these rather disparate bodies are doing quite a good job. People were asking whether London can trade in the euro, and the Bank of England and the Lord Mayor have been spreading the word that it can."
Will London will lose business? "Probably some, because Frankfurt and Paris are waking up. We lost badly on futures, but the Liffe market has bounced back. This is the first occasion that London has really faced a challenge. The City needs to stay ahead on effectiveness, efficiency and innovation. I see some business moving, but nothing dramatic.
"It is hard to think of what the legal profession should do. The answer is to say that you look to the legal profession to clear up areas of uncertainty. Any damage caused by the euro has been done already by not being in at the beginning."
But London will stay ahead of its rivals, says Peck. "It's where the competition is. Can you see the headquarters of Goldman Sachs or Morgan Stanley moving?"
Dorothy Livingston, Herbert Smith partner and chair of the banking sub-committee of the the City of London Law Society, says:
"It's a competitive world, and Paris and Frankfurt are striving hard to compete. But the City has a solid base with key advantages including low taxation, a flexible workforce and, of course, the language. A lot of the more complex transactions are done under English law. So the City is an attractive place to do business."
"The corporation does its job quite well, and the Financial Law Panel (which advises on legal uncertainties) plays a part. There's certainly an important role for the legal profession in this. I'm aware of eminent lawyers being involved already, and the City of London Law Society's banking sub-committee has regular contact with the Bank of England, Financial Law Panel, the Treasury and DTI."