Despite a lot of noise, we haven’t seen much of an exodus as yet. But if it does, plenty of people think it might be the foreign exchange market that heads the queues at Heathrow and City airports.
FX is increasingly automated: it doesn’t involve the same level of client meetings as, say, debt capital markets. In effect, it doesn’t really matter where the sales and trading teams sit, as long as your key time zones are well covered.
One senior FX banker I chatted to this week said the threat to London was overestimated. But before Darling & Co become complacent, they should listen to the reasons why.
First, said banker over lunch, forget other supposed regional centres such as Paris and Frankfurt. They’ll have the same regulatory and tax regimes as anywhere else in mainland Europe.
Forget, for the most part, Dubai. A few people have gone out there. If you like sunshine and don’t like paying tax, it may be the option for you. But the personal and family upheaval outweighs those positives by a long way. You’re more likely to bump into a Football Wag contemplating her marital status than an FX trader when you’re standing in the long shadow of the Burj Khalifa.
That leaves the country that everyone seems to be touting as the beneficiary of UK tax laws – Switzerland. Specifically the towns of Geneva or Zug.
Of course the country has its attractions. The likes of Credit Suisse and UBS show you can run a very good FX franchise surrounded by lakes and mountains. I’m not sure if it’s a plus or minus, but it is heinously expensive (See Positive beta: Short and sweet in Switzerland) and therefore exclusive.
But the real problem is the infrastructure. As my pal said: “I can assure you that if as many 500 FX professionals moved to Geneva, you’d run out of room. There just aren’t that many suitable properties available. And even if you can find somewhere to live, where are you going to send your kids to school?”
I immediately suggested a joint business venture to set up an international school on Lake Geneva – my intellectual capital, his seed capital.
He didn’t seem keen. I saw his point.
So, I wondered, is London’s place as the centre of the FX universe immovable? Not so, said my lunch companion. The place to watch out for is Singapore.
“Tax rates are low,” he said. “They’re set up for the international community; it’s already a regional FX centre; they’d incentivize you as a business to move out there; and there’s no way, once they had that business, they would do anything in regulatory terms to jeopardise it.”
“Oh, the day could come,” he continued, “when the centre for EUR/USD trading is Singapore. Can you imagine that?”
He was smiling. I couldn’t tell if his tongue was in his cheek.
