The BBC spin machine whirred into action this morning saying that, despite the promise of a 50% tax rate, the UK had been rated the top international financial centre by the World Economic Forum, overtaking the USA.
A closer examination shows that the UK's point score has fallen by 10%, but the USA has actually fallen by 15%, leaving it behind Australia.
Australia? International financial centre. The country with a 10% withholding tax on deposits by non-residents is a n international financial centre. Well, no it isn't, but with a largely introverted banking system and vast mineral wealth the Australian banks have fared well while the rest of the world has suffered, as previously mentioned.
The WEF survey isn't actually a measure of international banking but of financial development, and includes such measures as the number of ATM's per head of population and the strngth of the banking system which is why the Australians fare well this time.
London remains ahead primarily because of the depth and sophistication of its foreign exchange and derivatives markets, although the latter category is probably not due to the credit derivatives and other exotics but the plain vanilla interest rate and currency trades that run alongside the foreign exchange and debt markets.
The US has suffered because of the failure of several leading banks and the cludging of the debt securities markets, where it formerly held a considerable lead over the rest of the world.
If anything this demonstrates the irrelevance of the exact location of mobile hedge funds to the competitive edge of the City of London, but equally the fact that London is dealing with counterparties throughout the region demonstrates that mobile players don't have to sit in London and get hit with a 50% tax rate.
|Financial Development Index 2009 Rankings|
|2009 Rank||2008 Rank||2009 Score|
|Change in score|
|Hong Kong SAR||5||8||4.97||-0.26|
|United Arab Emirates||20||16||4.21||-0.40|