Ignore the gloomsters! London’s financial scene is bouncing back in full form
It’s been a pretty miserable 12 months for the financial services industry.
Once London’s star sector, it has seen scandal after scandal drag it though the mud and the City has lost its title as the world’s largest financial centre to New York. As a kick to the battered ribs, it is expected to fall to third place by 2015 – trampled by Hong Kong.
It is fair to say we all need the financial services sector to recover. And quick smart. “It really is the heartbeat of the British economy,” says Geoff Fawcett, Director at Hays, the leading recruiting expert.
“At Hays we see a six month lag between what happens in the financial services sector and in the broader jobs market. If we see a rise in vacancies in the City, the rest follows eventually.”
But before you extract all of your cash from your banks accounts and use it to fashion a raft and set sail to Zurich, there are reasons to be positive. In fact hell! Why don’t we celebrate the reasons why London’s financial services industry is likely to rise again:
1. The FTSE is looking good so far
The FTSE sprang out of the stalls over New Year breaking through 6000 points on the first day of trading before rising to its highest level since Feb 2011 by the end of the first week of the year.
2. The UK has historically been a financial centre
You can’t argue with history and there have always been reasons for London’s financial success. “London has always been a strong global player, we have seen growth in the east but that has certainly slowed this year,” says Fawcett. “There isn’t a lot of evidence that there will be a monumental power shift – our position time zone wise means London will always have a pivotal position.”
3. Easing of onerous regulations
The Basel III rules have been eased which will make the lives of our banks a lot easier in terms of liquidity requirements. “The regulation environment is likely to have a lighter touch than many have expected or feared in 2013,” says Stephen Archer, business analyst and director of Spring Partnerships. “This is further supported by the easing of the onerousness of Basel III on bank balance sheets.”
4. Disruptive newcomers are pushing up standards
Start-up financial institutions like Metro Bank have been and allowing consumers to demand more from their banks. This will encourage confidence in banks as standards rise across the board.
5. A swathe of IPOs could be heading our way
Many firms have held off listing because of the poor market which means there must be a backlog of companies waiting to go public. The government and analysts are doing all they can to turn AIM into a prime destination for the UK and Europe’s technology companies. All of this could lead to a bumper IPO year.
6. London will continue to resist harmonisation from European regulation
Government and City officials have continued to ensure that potentially damaging rules from Brussels do not affect our financial services.
7. M&A activity is due to jump up in 2013
We have had a slow 12 months in terms of M&A activity and analysts such as Ernst & Young are hoping to see activity rise in 2013.
“In the short-term corporates are hesitant to do deals; nevertheless there is huge pressure for companies to grow in the sluggish economy and M&A opportunity exists for those companies willing to be bold in today’s market,” says Richard Jeanneret, America’s Vice-Chair, Transaction Advisory Services for the global Ernst & Young organisation.
8. Pensions are drastically underfunded and will need to be topped up
According to the FT Advisor British pensions are dangerously underfunded meaning people will have to start paying into them soon or deal with severe consequences after they retire.
9. The Bank of England is getting a shake-up
Sir Mervyn King is about to wave goodbye to his tenure as governor of the Bank of England. New blood and fresh eyes might be just what we need in the form of Mark Carney.
“The FSA and Bank of England are changing their responsibilities and I think that will may well fuel some opportunity and I think it’s a bold move to bring an outsider in with a fresh pair of eyes,” says Fawcett.
10. The financial industry is willing to embrace change
Buying behaviours are changing and technology is advancing. This offers both old and new financial institutions plenty of opportunity to innovate and grow.
“With retail customers’ buying behaviours and expectations changing, we expect to see more innovation and vertical integration,” says Tony Virdi, Vice President and Head of Banking and Financial Services in the UK & Ireland, Cognizant
“These customer behaviours and expectations are both driven and supported by game-changing technological innovations such as mobile payments, the digital wallet, the rise of eCommerce and mobile money; all generating many opportunities for both new emerging players as well as established companies.”
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