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What is London's future as a financial services centre?

16th January 2007

Speech given to the London School of Economics

London is undeniably the location of choice for global financial services. New issues of shares on the LSE raised approximately £28 billion last year and the LSE attracted 99 international floats from companies covering 25 countries globally. The secondary AIM market also attracted a huge amount of new business from all over the world. In addition a large number of support services such as lawyers and accountants thrive in the city, which has become a magnet for many of the brightest people from all over the world.

However, now is not a time to be complacent about our success. A number of economic trends are altering the global business environment and the growth of emerging economies (such as China and India) present a challenge as well as an opportunity for London. If the City stays competitive, I see no reason why it should not continue to prosper as it has done since deregulating in "Big-Bang" and seeing off Frankfurt and other European Bourses and now also New York.

It is important for London to recognise its strengths and work at maintaining them. For example the UK's "light-touch" regulatory approach is recognised as key to attracting international businesses to London. Last year, NASDAQ's bid for the LSE fuelled speculation that US SEC rules, which impose stricter accounting rules and penalties on publicly traded companies in the US, may be applied in the UK. So Conservatives supported the Stock Exchange Protection Bill which seeks to bolster our exchanges' regulatory system.

Looking to the future I also think issues such as corporate responsibility are going to become increasingly prominent. As initiatives, such as those just arranged by M&S, become increasingly widespread and more publicised, the culture of corporate responsibility will spread and this will of course impact on the provision of financial services as well.

Essentially, maintaining London's premiere position is a question of remaining flexible and responding to the changing requirements of rapidly evolving markets. This will require ongoing vigilance, not only from the SEC but also from Brussels which continuously eyes the less onerous regime of the Alternative Investment Market and also sometimes from this Government, which does appreciate the importance of the city as the "golden goose", but which can sometimes get carried away on the regulatory front.

Its reputation as a leading financial centre means a great pool of talent has gathered from around the world. London's competitiveness as a financial centre will rely on its continuing to attract highly skilled workers from the UK and internationally. In order to do so London needs to make sure its living conditions are as attractive as its career opportunities. This means addressing the issues that face first time home-owners, and providing a transport system that that meets the demands of its commuters. Issues such as street crime should also not be ignored if London is to continue to be a successful commercial centre in which its workers will enjoy living.

Jonathan Djanogly MP
Shadow Minister Corporate Governance

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