Speaker 1: It's that time of year again. We've a new champion
Speaker 1: for financial services and the square mile. Alister King is
Speaker 1: the six hundred and ninety sixth Lord Mayor of London.
Speaker 1: He's an aw set manager and former corporate lawyer and
Speaker 1: says his aim this year is to reopen London's capital markets.
Speaker 1: And Alster King is with us in the Bloomberg Radio studio.
Speaker 1: Good morning, great to see you with us now. Rachel
Speaker 1: Reeves hasn't speaking to Bloomberg ahead of her Mansion House
Speaker 1: speech tonight. She says that the UK will consolidate pension
Speaker 1: funds but won't force them to invest in UK assets.
Speaker 1: Is this going to work?
Speaker 2: Rachel Reeves is absolutely right that there needs to be
Speaker 2: real effort and energy put into a reforming of the
Speaker 2: pension system. We have had a too long a period
Speaker 2: where pension funds have been unreformed and I think that
Speaker 2: that's led to a an imbalanced system that we have.
Speaker 2: It's also wasteful in the sense of we've had a
Speaker 2: big pool, the second largest pool of a pension pool
Speaker 2: in the world, yet we're not allowed to use those
Speaker 2: moneys to invest in some of the recesses that we
Speaker 2: have to invest into British innovation, and I think that
Speaker 2: there does need to be substantial change.
Speaker 3: Okay, is this going to be enough? The comparison is
Speaker 3: being made, for example, to the Australian pension fund, I
Speaker 3: wonder whether that's a little bit misleading, the Aussie fund
Speaker 3: being something like forty years old and absolutely vast and
Speaker 3: deeply invested in Australian champions. I mean, surely the UK
Speaker 3: version cannot be compared to that.
Speaker 2: No, but I think that there is a great opportunity
Speaker 2: for us is the fact that in the Australian system
Speaker 2: there are around fourteen of the superannuation funds. The number
Speaker 2: of pension funds we have here in the United Kingdom
Speaker 2: is around twenty one thousand. I mean, imagine the extraordinary
Speaker 2: duplication of fees and effort in having twenty one thousand
Speaker 2: different pension pots. I think the case for consolidation is there.
Speaker 1: The idea though, of a consolidation boosting and having an
Speaker 1: effect on the UK is something. It's not a new idea,
Speaker 1: it's something that's been mentioned by previous chancellors as well,
Speaker 1: but we haven't seen much progress on it. How quickly
Speaker 1: can we expect to see results or to see if
Speaker 1: it's working at all.
Speaker 2: I think that there is certainly a willingness to among
Speaker 2: the around the city of that there is a need
Speaker 2: to use some of these funds to invest into British innovation.
Speaker 2: I think the you have this element that if you're
Speaker 2: all investing into one particular class of asset in the
Speaker 2: pension's case, largely fixed income affect, that becomes a riskier
Speaker 2: asset if everyone's in it, and so therefore I do
Speaker 2: sense that there is a need for diversification and also
Speaker 2: there's a need to use some of that vitality in
Speaker 2: order to invest into risk assets.
Speaker 1: Are you against the idea of mandating funds to invest
Speaker 1: in the UK assets?
Speaker 2: I mean, I think it would need to have a
Speaker 2: substantial change in the law in the sense that pension
Speaker 2: fund trustees do have fillocy duties to try and find
Speaker 2: the best returns, and so therefore if they are if
Speaker 2: you do want to mandate, then there has to be
Speaker 2: it has to be a legal element. But I think
Speaker 2: that certainly, I think the mood music out there within
Speaker 2: the financial community is that there is a much more
Speaker 2: willingness to invest into UK assets now, and it may
Speaker 2: be that certainly I would say incentives to go ahead
Speaker 2: and invest into UK assets rather than mandation. Maybe a
Speaker 2: way forward.
Speaker 1: What would does look like?
Speaker 2: Well, I mean I think that we could look at
Speaker 2: I'm something I would be talking about later on in
Speaker 2: the match and house banquet today, and that is this
Speaker 2: idea of the of you know, cash ices for instance.
Speaker 2: You know, we're getting all sorts of possibilities in the
Speaker 2: relation to tax breaks. You know, why are we incentivizing
Speaker 2: people to invest into into cash, a largely non productive asset.
Speaker 2: Why don't we give higher tax incentives to invest into
Speaker 2: into UK public companies? You know, that might be something
Speaker 2: that I'll be rating with the Chancellor today.
Speaker 3: Yeah, okay, that's interesting. But I mean, if I may,
Speaker 3: those potentially are really quite small tweaks versus the twenty
Speaker 3: to thirty year decline in investing in UK assets that
Speaker 3: we have seen. The S and P five hundred has
Speaker 3: tripled in value in the past decade, the fifty one
Speaker 3: hundred has been flat. Shouldn't we just give up on
Speaker 3: the idea of boosting the London market except that it
Speaker 3: is in decline and actually focus on other businesses where
Speaker 3: the London has real strength.
Speaker 2: No, I don't agree. I think that there is a
Speaker 2: case for the London Stock Exchange and quoted assets here
Speaker 2: in London. If we are serious about being a global
Speaker 2: financial center, which we are, then we have to have
Speaker 2: a really functioning, all powerful stock exchange. And just to
Speaker 2: your earlier point, in relation to that cash actual point,
Speaker 2: it's not really tinkering around the edges. The market capitalization
Speaker 2: of the London market is around two trillion pounds. The
Speaker 2: amount of money in cash isces is two hundred and
Speaker 2: fifty billion, so over ten percent of the market capitalization.
Speaker 2: There is a decent amount of money to go in
Speaker 2: there that potentially could be utilized.
Speaker 1: How much harder is this mission to revive the capital
Speaker 1: markets in London now that Donald Trump is in power
Speaker 1: in the United States and the ensuing market reaction you
Speaker 1: know the dollar or two year high.
Speaker 2: Well, the city did pretty well under the last Trump administration.
Speaker 2: I think that there was and so I don't think
Speaker 2: it's not a zero sum game either fatally, it's more
Speaker 2: I mean, I sent it provides different challenges and different opportunities.
Speaker 2: And there are of course some parts of the world
Speaker 2: that don't want to be listing. For instance, in New York,
Speaker 2: they wanted list perhaps elsewhere. So I do sense that
Speaker 2: there are opportunities for us, and we're big enough to
Speaker 2: take advantage of those opportunities.
Speaker 3: Do you see any signs of companies based here in
Speaker 3: the UK working here in the UK on showing or
Speaker 3: reshowing into the US now.
Speaker 2: I haven't experienced much of that in the course of
Speaker 2: last week. People have not been mentioning that to me.
Speaker 2: In really too that certainly in relation to the areas
Speaker 2: that I work in. It's something that potentially could come
Speaker 2: till later on, and I think it's up to us
Speaker 2: to try and make sure that the city remains very vital,
Speaker 2: properly regulated and a great opportunity for investment.
Speaker 3: Does the UK avoid tariffs by dint of I mean
Speaker 3: you've talked about, you know, perhaps the UK doing a
Speaker 3: little better under Trump or the last time around. I
Speaker 3: mean he's a slight angler file perhaps also thanks the
Speaker 3: fact that we've got a services driven economy. Does the
Speaker 3: UK avoid tariffs or the big hit that we expect
Speaker 3: for Europe.
Speaker 2: I don't think that will avoid them. Let's see what
Speaker 2: is in the detail of the legislation rather than we're
Speaker 2: dealing on rumor at the moment. But I do sense
Speaker 2: that the British economy is well set up giving its
Speaker 2: services bias to avoid the full front of tariffs.
Speaker 1: You're welcoming Rachel Reeves to Mansion House later for this speech.
Speaker 1: I think it's fair to say that a lot of
Speaker 1: the decisions in the budget haven't gone down terribly well
Speaker 1: with businesses, things like the rise in employers national insurance contributions.
Speaker 1: What's the financial services community saying about these things?
Speaker 2: I mean, I think that there is I've heard the criticism,
Speaker 2: it is out there. I think there is, which is interesting.
Speaker 2: I think on the other side, though, there is something
Speaker 2: that's been lacking perhaps for some time, and that is
Speaker 2: there is some stability, and I think that the stability
Speaker 2: that can give rise to people starting to make long
Speaker 2: term capital budgeting decisions. And so therefore, though perhaps some
Speaker 2: of the fiscal landscape has changed, there is the possibility
Speaker 2: that for the next five years they know pretty much
Speaker 2: what's going to happen, and so therefore they can then
Speaker 2: take that into consideration when they're working out that expansion. Also,
Speaker 2: I would say that I don't see a fall off
Speaker 2: certainly in the financial professional services people that I have
Speaker 2: spoken to in their investment plans in job creation. No,
Speaker 2: I don't think it will in these sectors. I think
Speaker 2: it's different in other sectors out there, Hospitality, you know,
Speaker 2: there may be some problems. But I think financial professional services,
Speaker 2: which is in my Baileywick, I think that the impression
Speaker 2: there is that it's still a still a positive place.
Speaker 3: Okay. Having said that, perhaps that may not be so
Speaker 3: surprising when you think that Rachel Reaves and the Labor
Speaker 3: Goulment do seem to be listening to the city in
Speaker 3: the sense that she's talking about consolidation but no mandate,
Speaker 3: which was kind of the big overhang and the big worry. Now, though,
Speaker 3: is she going to come to Mansion House and actually
Speaker 3: ask the City of London, press the City of London
Speaker 3: to deliver on economic growth because that is her pitch,
Speaker 3: isn't it, Private businesses deliver growth.
Speaker 2: I'm sure she will do exactly that this evening, and
Speaker 2: she will be asking the city to do that. And
Speaker 2: also I think she's right to ask it because effectually,
Speaker 2: I sense the city and the financial professional services sector
Speaker 2: in general, that's where the labor government are going to
Speaker 2: get their growth in the short term. Effectually, because the
Speaker 2: building's already built, that the people are already trained. The
Speaker 2: missing element is confidence. In my view, I think there's
Speaker 2: obviously some things to do in relation to regulatory reform,
Speaker 2: and I'll be talking with the Chancellor about that today.
Speaker 3: So is this a pro business a pro financial services government?
Speaker 2: Well? I think that the thing that I my job
Speaker 2: as Lord Mayor will be to try and boost confidence
Speaker 2: within the sector in order to get people to take
Speaker 2: investment decisions in order to provide some of that growth.
Speaker 1: Has the city completely moved on now from its challenges
Speaker 1: over Braxast? Has there We know that there's discussions aren't
Speaker 1: going about perhaps improving ties, but there are some looming
Speaker 1: dadlines as well in issues like clearing that could pose
Speaker 1: further challenges.
Speaker 2: I would say yes. Brexit has scarcely featured in some
Speaker 2: of the questions that I've had over the course of
Speaker 2: the last a few days. I've been in office since Friday,
Speaker 2: and it hasn't come up. I think also the further
Speaker 2: away you get from London as you go around the world,
Speaker 2: the less again sort of where Brexit comes up as
Speaker 2: a matter. I think that the course is set and
Speaker 2: so therefore I think that's there are other things to
Speaker 2: be concerned about.
Speaker 3: A final thought though, in particular the non doms issue.
Speaker 3: We spent a lot of time thinking about that and
Speaker 3: tracking the number of people who were leaving the UK.
Speaker 3: Do you think that there will be more of those
Speaker 3: because of the tax changes from Rachel Leaves.
Speaker 2: What I've seen is that that people who have left,
Speaker 2: and we are aware of them, some leaving, largely their
Speaker 2: businesses are remain remaining here in the United Kingdom, so
Speaker 2: that I have not heard of businesses leaving because of
Speaker 2: somebody's tax affairs. And plus also I think there is
Speaker 2: a great desire along many of them to return at
Speaker 2: some stage. But I think that where we've got an
Speaker 2: opportunity is the fact that forty percent of people who
Speaker 2: work in the city of financial preacial services in the
Speaker 2: city are born abroad. Of it, we have to make
Speaker 2: sure we've got a really competitive fiscal land escape for
Speaker 2: them to stay here, to scale here and invest here
Speaker 2: and visas.
Speaker 1: Is that an issue.
Speaker 2: I think it's certainly something that we need to be
Speaker 2: working with the Chancellor and others in government to make
Speaker 2: sure that we're right. But I think that that's less
Speaker 2: of an issue now than perhaps was eighteen months ago.
Speaker 3: Alistair, thank you so much. For your time this morning,
Speaker 3: for taking all of our many questions. Alistair King is
Speaker 3: the Lord Mayor of London six hundred and ninety six.
Speaker 3: I hope that you're going to become a friend of
Speaker 3: the program as your predecessors have been. Michael Minelli, that
Speaker 3: you're taking over from. Hope we'll see you again very soon.