WEBVTT - London's New Lord Mayor Talks Reforming The City

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<v Speaker 1>It's that time of year again. We've a new champion

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<v Speaker 1>for financial services and the square mile. Alister King is

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<v Speaker 1>the six hundred and ninety sixth Lord Mayor of London.

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<v Speaker 1>He's an aw set manager and former corporate lawyer and

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<v Speaker 1>says his aim this year is to reopen London's capital markets.

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<v Speaker 1>And Alster King is with us in the Bloomberg Radio studio.

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<v Speaker 1>Good morning, great to see you with us now. Rachel

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<v Speaker 1>Reeves hasn't speaking to Bloomberg ahead of her Mansion House

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<v Speaker 1>speech tonight. She says that the UK will consolidate pension

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<v Speaker 1>funds but won't force them to invest in UK assets.

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<v Speaker 1>Is this going to work?

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<v Speaker 2>Rachel Reeves is absolutely right that there needs to be

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<v Speaker 2>real effort and energy put into a reforming of the

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<v Speaker 2>pension system. We have had a too long a period

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<v Speaker 2>where pension funds have been unreformed and I think that

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<v Speaker 2>that's led to a an imbalanced system that we have.

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<v Speaker 2>It's also wasteful in the sense of we've had a

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<v Speaker 2>big pool, the second largest pool of a pension pool

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<v Speaker 2>in the world, yet we're not allowed to use those

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<v Speaker 2>moneys to invest in some of the recesses that we

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<v Speaker 2>have to invest into British innovation, and I think that

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<v Speaker 2>there does need to be substantial change.

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<v Speaker 3>Okay, is this going to be enough? The comparison is

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<v Speaker 3>being made, for example, to the Australian pension fund, I

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<v Speaker 3>wonder whether that's a little bit misleading, the Aussie fund

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<v Speaker 3>being something like forty years old and absolutely vast and

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<v Speaker 3>deeply invested in Australian champions. I mean, surely the UK

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<v Speaker 3>version cannot be compared to that.

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<v Speaker 2>No, but I think that there is a great opportunity

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<v Speaker 2>for us is the fact that in the Australian system

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<v Speaker 2>there are around fourteen of the superannuation funds. The number

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<v Speaker 2>of pension funds we have here in the United Kingdom

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<v Speaker 2>is around twenty one thousand. I mean, imagine the extraordinary

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<v Speaker 2>duplication of fees and effort in having twenty one thousand

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<v Speaker 2>different pension pots. I think the case for consolidation is there.

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<v Speaker 1>The idea though, of a consolidation boosting and having an

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<v Speaker 1>effect on the UK is something. It's not a new idea,

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<v Speaker 1>it's something that's been mentioned by previous chancellors as well,

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<v Speaker 1>but we haven't seen much progress on it. How quickly

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<v Speaker 1>can we expect to see results or to see if

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<v Speaker 1>it's working at all.

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<v Speaker 2>I think that there is certainly a willingness to among

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<v Speaker 2>the around the city of that there is a need

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<v Speaker 2>to use some of these funds to invest into British innovation.

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<v Speaker 2>I think the you have this element that if you're

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<v Speaker 2>all investing into one particular class of asset in the

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<v Speaker 2>pension's case, largely fixed income affect, that becomes a riskier

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<v Speaker 2>asset if everyone's in it, and so therefore I do

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<v Speaker 2>sense that there is a need for diversification and also

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<v Speaker 2>there's a need to use some of that vitality in

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<v Speaker 2>order to invest into risk assets.

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<v Speaker 1>Are you against the idea of mandating funds to invest

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<v Speaker 1>in the UK assets?

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<v Speaker 2>I mean, I think it would need to have a

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<v Speaker 2>substantial change in the law in the sense that pension

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<v Speaker 2>fund trustees do have fillocy duties to try and find

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<v Speaker 2>the best returns, and so therefore if they are if

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<v Speaker 2>you do want to mandate, then there has to be

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<v Speaker 2>it has to be a legal element. But I think

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<v Speaker 2>that certainly, I think the mood music out there within

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<v Speaker 2>the financial community is that there is a much more

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<v Speaker 2>willingness to invest into UK assets now, and it may

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<v Speaker 2>be that certainly I would say incentives to go ahead

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<v Speaker 2>and invest into UK assets rather than mandation. Maybe a

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<v Speaker 2>way forward.

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<v Speaker 1>What would does look like?

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<v Speaker 2>Well, I mean I think that we could look at

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<v Speaker 2>I'm something I would be talking about later on in

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<v Speaker 2>the match and house banquet today, and that is this

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<v Speaker 2>idea of the of you know, cash ices for instance.

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<v Speaker 2>You know, we're getting all sorts of possibilities in the

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<v Speaker 2>relation to tax breaks. You know, why are we incentivizing

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<v Speaker 2>people to invest into into cash, a largely non productive asset.

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<v Speaker 2>Why don't we give higher tax incentives to invest into

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<v Speaker 2>into UK public companies? You know, that might be something

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<v Speaker 2>that I'll be rating with the Chancellor today.

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<v Speaker 3>Yeah, okay, that's interesting. But I mean, if I may,

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<v Speaker 3>those potentially are really quite small tweaks versus the twenty

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<v Speaker 3>to thirty year decline in investing in UK assets that

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<v Speaker 3>we have seen. The S and P five hundred has

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<v Speaker 3>tripled in value in the past decade, the fifty one

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<v Speaker 3>hundred has been flat. Shouldn't we just give up on

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<v Speaker 3>the idea of boosting the London market except that it

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<v Speaker 3>is in decline and actually focus on other businesses where

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<v Speaker 3>the London has real strength.

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<v Speaker 2>No, I don't agree. I think that there is a

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<v Speaker 2>case for the London Stock Exchange and quoted assets here

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<v Speaker 2>in London. If we are serious about being a global

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<v Speaker 2>financial center, which we are, then we have to have

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<v Speaker 2>a really functioning, all powerful stock exchange. And just to

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<v Speaker 2>your earlier point, in relation to that cash actual point,

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<v Speaker 2>it's not really tinkering around the edges. The market capitalization

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<v Speaker 2>of the London market is around two trillion pounds. The

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<v Speaker 2>amount of money in cash isces is two hundred and

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<v Speaker 2>fifty billion, so over ten percent of the market capitalization.

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<v Speaker 2>There is a decent amount of money to go in

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<v Speaker 2>there that potentially could be utilized.

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<v Speaker 1>How much harder is this mission to revive the capital

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<v Speaker 1>markets in London now that Donald Trump is in power

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<v Speaker 1>in the United States and the ensuing market reaction you

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<v Speaker 1>know the dollar or two year high.

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<v Speaker 2>Well, the city did pretty well under the last Trump administration.

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<v Speaker 2>I think that there was and so I don't think

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<v Speaker 2>it's not a zero sum game either fatally, it's more

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<v Speaker 2>I mean, I sent it provides different challenges and different opportunities.

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<v Speaker 2>And there are of course some parts of the world

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<v Speaker 2>that don't want to be listing. For instance, in New York,

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<v Speaker 2>they wanted list perhaps elsewhere. So I do sense that

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<v Speaker 2>there are opportunities for us, and we're big enough to

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<v Speaker 2>take advantage of those opportunities.

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<v Speaker 3>Do you see any signs of companies based here in

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<v Speaker 3>the UK working here in the UK on showing or

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<v Speaker 3>reshowing into the US now.

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<v Speaker 2>I haven't experienced much of that in the course of

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<v Speaker 2>last week. People have not been mentioning that to me.

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<v Speaker 2>In really too that certainly in relation to the areas

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<v Speaker 2>that I work in. It's something that potentially could come

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<v Speaker 2>till later on, and I think it's up to us

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<v Speaker 2>to try and make sure that the city remains very vital,

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<v Speaker 2>properly regulated and a great opportunity for investment.

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<v Speaker 3>Does the UK avoid tariffs by dint of I mean

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<v Speaker 3>you've talked about, you know, perhaps the UK doing a

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<v Speaker 3>little better under Trump or the last time around. I

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<v Speaker 3>mean he's a slight angler file perhaps also thanks the

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<v Speaker 3>fact that we've got a services driven economy. Does the

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<v Speaker 3>UK avoid tariffs or the big hit that we expect

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<v Speaker 3>for Europe.

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<v Speaker 2>I don't think that will avoid them. Let's see what

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<v Speaker 2>is in the detail of the legislation rather than we're

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<v Speaker 2>dealing on rumor at the moment. But I do sense

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<v Speaker 2>that the British economy is well set up giving its

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<v Speaker 2>services bias to avoid the full front of tariffs.

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<v Speaker 1>You're welcoming Rachel Reeves to Mansion House later for this speech.

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<v Speaker 1>I think it's fair to say that a lot of

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<v Speaker 1>the decisions in the budget haven't gone down terribly well

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<v Speaker 1>with businesses, things like the rise in employers national insurance contributions.

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<v Speaker 1>What's the financial services community saying about these things?

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<v Speaker 2>I mean, I think that there is I've heard the criticism,

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<v Speaker 2>it is out there. I think there is, which is interesting.

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<v Speaker 2>I think on the other side, though, there is something

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<v Speaker 2>that's been lacking perhaps for some time, and that is

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<v Speaker 2>there is some stability, and I think that the stability

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<v Speaker 2>that can give rise to people starting to make long

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<v Speaker 2>term capital budgeting decisions. And so therefore, though perhaps some

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<v Speaker 2>of the fiscal landscape has changed, there is the possibility

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<v Speaker 2>that for the next five years they know pretty much

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<v Speaker 2>what's going to happen, and so therefore they can then

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<v Speaker 2>take that into consideration when they're working out that expansion. Also,

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<v Speaker 2>I would say that I don't see a fall off

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<v Speaker 2>certainly in the financial professional services people that I have

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<v Speaker 2>spoken to in their investment plans in job creation. No,

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<v Speaker 2>I don't think it will in these sectors. I think

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<v Speaker 2>it's different in other sectors out there, Hospitality, you know,

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<v Speaker 2>there may be some problems. But I think financial professional services,

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<v Speaker 2>which is in my Baileywick, I think that the impression

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<v Speaker 2>there is that it's still a still a positive place.

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<v Speaker 3>Okay. Having said that, perhaps that may not be so

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<v Speaker 3>surprising when you think that Rachel Reaves and the Labor

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<v Speaker 3>Goulment do seem to be listening to the city in

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<v Speaker 3>the sense that she's talking about consolidation but no mandate,

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<v Speaker 3>which was kind of the big overhang and the big worry. Now, though,

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<v Speaker 3>is she going to come to Mansion House and actually

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<v Speaker 3>ask the City of London, press the City of London

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<v Speaker 3>to deliver on economic growth because that is her pitch,

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<v Speaker 3>isn't it, Private businesses deliver growth.

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<v Speaker 2>I'm sure she will do exactly that this evening, and

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<v Speaker 2>she will be asking the city to do that. And

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<v Speaker 2>also I think she's right to ask it because effectually,

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<v Speaker 2>I sense the city and the financial professional services sector

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<v Speaker 2>in general, that's where the labor government are going to

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<v Speaker 2>get their growth in the short term. Effectually, because the

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<v Speaker 2>building's already built, that the people are already trained. The

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<v Speaker 2>missing element is confidence. In my view, I think there's

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<v Speaker 2>obviously some things to do in relation to regulatory reform,

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<v Speaker 2>and I'll be talking with the Chancellor about that today.

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<v Speaker 3>So is this a pro business a pro financial services government?

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<v Speaker 2>Well? I think that the thing that I my job

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<v Speaker 2>as Lord Mayor will be to try and boost confidence

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<v Speaker 2>within the sector in order to get people to take

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<v Speaker 2>investment decisions in order to provide some of that growth.

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<v Speaker 1>Has the city completely moved on now from its challenges

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<v Speaker 1>over Braxast? Has there We know that there's discussions aren't

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<v Speaker 1>going about perhaps improving ties, but there are some looming

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<v Speaker 1>dadlines as well in issues like clearing that could pose

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<v Speaker 1>further challenges.

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<v Speaker 2>I would say yes. Brexit has scarcely featured in some

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<v Speaker 2>of the questions that I've had over the course of

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<v Speaker 2>the last a few days. I've been in office since Friday,

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<v Speaker 2>and it hasn't come up. I think also the further

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<v Speaker 2>away you get from London as you go around the world,

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<v Speaker 2>the less again sort of where Brexit comes up as

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<v Speaker 2>a matter. I think that the course is set and

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<v Speaker 2>so therefore I think that's there are other things to

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<v Speaker 2>be concerned about.

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<v Speaker 3>A final thought though, in particular the non doms issue.

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<v Speaker 3>We spent a lot of time thinking about that and

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<v Speaker 3>tracking the number of people who were leaving the UK.

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<v Speaker 3>Do you think that there will be more of those

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<v Speaker 3>because of the tax changes from Rachel Leaves.

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<v Speaker 2>What I've seen is that that people who have left,

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<v Speaker 2>and we are aware of them, some leaving, largely their

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<v Speaker 2>businesses are remain remaining here in the United Kingdom, so

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<v Speaker 2>that I have not heard of businesses leaving because of

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<v Speaker 2>somebody's tax affairs. And plus also I think there is

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<v Speaker 2>a great desire along many of them to return at

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<v Speaker 2>some stage. But I think that where we've got an

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<v Speaker 2>opportunity is the fact that forty percent of people who

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<v Speaker 2>work in the city of financial preacial services in the

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<v Speaker 2>city are born abroad. Of it, we have to make

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<v Speaker 2>sure we've got a really competitive fiscal land escape for

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<v Speaker 2>them to stay here, to scale here and invest here

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<v Speaker 2>and visas.

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<v Speaker 1>Is that an issue.

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<v Speaker 2>I think it's certainly something that we need to be

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<v Speaker 2>working with the Chancellor and others in government to make

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<v Speaker 2>sure that we're right. But I think that that's less

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<v Speaker 2>of an issue now than perhaps was eighteen months ago.

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<v Speaker 3>Alistair, thank you so much. For your time this morning,

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<v Speaker 3>for taking all of our many questions. Alistair King is

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<v Speaker 3>the Lord Mayor of London six hundred and ninety six.

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<v Speaker 3>I hope that you're going to become a friend of

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<v Speaker 3>the program as your predecessors have been. Michael Minelli, that

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<v Speaker 3>you're taking over from. Hope we'll see you again very soon.