A huge share of Britain's GDP, tax revenues and exports are dependent upon financial services and the continuing ability of London to attract investment in this vital industry. It is one sector where we are a world leader. Take a look at the WorldMapper map with countries' sizes adjusted to their share of the international finance and insurance market. 99% of world profits from this huge industry flow to Switzerland, Germany, Luxembourg and the UK - we are the leaders:
This is a highly mobile industry as it operates globally and can communicate effortlessly across the world. If London ceases to be competitive we could lose our lead in this vital sector really quickly. If that happens we will struggle to make up for the loss of most of the around £15 billion of tax revenues that London exports to the rest of the country every year rather than spending itself. That's just tax revenues - our long-term prosperity would also seriously suffer.
With all that in mind the news, from the Financial Times, that our competitive position relative to New York and other financial centres is eroding should be extremely worrying:
"London is losing its status as the world’s leading financial centre and being overtaken by New York, according to a global survey of finance professionals.
The collapse of Northern Rock and the proposed tax crackdown on non-domiciled residents are making the UK less attractive to overseas businesses, according to the City of London Corporation, which commissioned the survey.
A separate survey, also commissioned by the City, said the UK tax system had lost its competitive edge over other financial centres. The UK had become increasingly unpredictable and uncertain, complex and unnecessarily aggressive in its approach to taxpayers, it found."
Cross-posted from the TaxPayers' Alliance blog.