Wednesday 8 November 2017

What shoud London finance focus on post Brexit?

Using the concept of individual countries having national competetive advantages what does post-Brexit offer London.

Lots of comments about European banks moving jobs away from UK. My 2c is we need to push the high leverage, low margin, commoditized, systemically risky activities to France/ Germany.

Germany for the lending as they dont get finance anyway and their stock of savings gives them an advantage in commoditised lending. And in post-debt bubble environments its probably not the best business to be 15x leveraged in.

France for the derivatives. You cant compete with an army of engineering PhDs using sovereign backstoped bank balance sheets anyway. 

As luck would have it they seem to be trying to get the business anyway via regulatory measures. 
In my view London needs to reemerge as a merchant banking/ entrepreneurial hub. A nexus of deals and 'at risk' capital. Particularly in credit, there seems to be a lot of opportunities for merchant banking or flexible private credit investments given comemrcial bank retrenchement from anything involved. 

EM always needs funding and is where most of the stable medium term growth and capital formation is.

A mix of merchant banks with access to cheap offshore funding and closed end or other flxible funds/ pooled structures is the most appropriate way to achieve this. 

If we are going to have a wage-inflation-cpaex led cycle over the next 10 years this is especially important.

1 comment: