No such thing as a free crunch這標題模仿No such thing as a free lunch.
- A decisive confrontation.
- A critical moment or situation, especially one that occurs because of a shortage of time or resources: a year-end crunch; an energy crunch.
- A period of financial difficulty characterized by tight money and unavailability of credit
Nov 19th 2008
From The World in 2009 print edition
London will rebound from the financial crisis, but it has work to do to stay competitive, argues the city's mayor Boris Johnson
TWO decades ago Londoners used to fret about whether their city was faring better or worse than Paris. A decade ago, around the time of the launch of the euro, Londoners worried that Frankfurt would gain the upper hand. But in 2008 London can claim to be the financial centre of not just Europe but the world, on a par with (or by some accounts surpassing) New York. The twin cities of NY-Lon, the diamonds on the opposite coasts of the Atlantic, are now the only two truly world cities, global magnets for talent and business.
But there is no perch more perilous than the top one, especially when a hurricane hits. London has traditionally been super-cyclical, experiencing the ups and downs of the British economy in magnified form. With financial services playing such a large part of its economy, it is particularly vulnerable. The collapse of American banks such as Lehman hits London as hard as British ones such as HBOS.
London has also been at the forefront of Britain’s debt-fuelled house-price boom, and is at the forefront of the collapse. By October 2008, house prices had fallen by around 10% from their peak, and only Pollyannas can persuade themselves that the widespread predictions of further falls are wrong.
History is little help in forecasting how this financial and housing turmoil will affect the wider economy, but there is cause for sensible optimism. Comparisons with the 1930s are wildly overblown—then around a quarter of adults were unemployed, whereas now the figure is only around 5%. The fall in the stockmarket and the rise in inflation are a fraction of what they were then. Indeed, by some measures stocks already appear underpriced.
The diverse and dynamic London economy may take a hit, but it is fundamentally very sound. Londoners are highly productive, and in many industries besides finance, such as creative ones, they are world-class. My economists predict that the London economy will grow—albeit marginally—in 2009, before rebounding in 2010.
NY-Lon, maybe, but not TefLon
But the financial crisis is bringing to the fore many of the longer-term challenges that London faces. The most immediate danger is that we over-regulate and over-tax ourselves into a second-class city. The British government must not respond to the crisis by imposing so many new rules on bankers that we drive them elsewhere, as the American government did with the Sarbanes-Oxley act after the Enron scandal. You can’t regulate your way out of a recession, but you can regulate your way into one. It is essential at this time to defend financial services from its many detractors. The masters of the universe may not be popular here, but there are many other parts of the universe that would welcome them with open arms.
Rising taxes are also making us uncompetitive. The British government has steadily increased the tax burden on multinational corporations, making London increasingly unattractive as a base for global headquarters. Some companies have already left, and at the end of 2008 around 40 of the FTSE 100 companies are considering relocating. It is a cause of intense anxiety to the industry leaders of my International Business Advisory Council, who have warned me that high taxes—particularly on foreign earnings—are making London an unattractive base. Our once predictable tax regime has become unpredictable, with Treasury U-turns and threats of windfall taxes on energy companies.
Personal taxation, too, has become less favourable with the botched introduction of the levy on non-doms and the increase in capital-gains tax. It is not in my powers to change such taxes, and unless the national government adopts a strategy of global tax competitiveness, the exodus of HQs from London will accelerate.
A review of London’s financial services has shown that, although London has many strengths, its competitiveness in many areas is decreasing. Global wealth is moving east, a trend that the financial crisis can only deepen. Asian and Middle Eastern financial centres pose a growing challenge to our financial dominance. There are concerns that London’s IT infrastructure is not up to future demands. The transport network is overstretched, and even airlines admit that Heathrow is a disgrace—not just a hassle for travellers, but giving a poor welcome to visitors, with long immigration queues. There are continuing concerns about London being one of the world’s most expensive cities. Although, like most Londoners, I believe London is the greatest city on earth, it performs poorly in many rankings of quality of life.
As mayor, I must make sure that everything is done to retain our global pre-eminence. London has an extraordinary resilience, based on the diversity and drive of those who reside in it. This resilience ensured it surmounted the challenges it faced in the past, and will ensure we surmount those in the years ahead.