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New research has revealed that people are increasingly less willing to follow the money to big economic and urban centers and are instead choosing to live, work and invest in places that give them better quality of life - and in turn the money is following them. Here Enshalla Anderson, Chief Strategy Officer at FutureBrand North America, provides her thoughts on the changing economic landscape.

This recalibration of global economies and workforces has come to light in our latest Country Brand Index, which re-orders the World Bank’s top ranking 75 countries (in terms of GDP) by how well they’re perceived against an alternative set of factors, such as value system, business potential, environmental friendliness, culture and tourism.

In the index, ‘quality of life’ was the attribute that averaged the highest in the top 10 countries, and averaged lowest in the bottom 10. In line with this are the findings that people are placing increasing importance on tolerance and environmental factors in the choices that they make about where they work, live, and visit. This is set to radically change how countries and companies organize themselves to attract talent, tourism and investment.

In the meantime, the so-called Fourth Industrial Revolution, defined by the arrival of substantial technological change, has transformed our day-to-day reality. Individuals now have more freedom to choose where they live and how they work, and they’re exercising that choice. The arrival of 5G marks a tipping point in all of this this and as telco companies roll out 5G services, we’re likely to see a spreading out of the intellectual capital across the country, instead of being isolated to the key economic hubs.

Meanwhile, we’ve observed businesses with aspirations for global growth actively avoid expanding in the expected international locations and instead set-up in relatively obscure or peripheral locations. They’re looking ahead and taking advantage of this diversifying workforce – tapping new talent, creating new opportunities for people who don’t want to live in the big cities and desire to work remotely, and benefitting from favorable tax rates and perks from regional governments along the way.

The groundswell of environmentalism is also fuelling this shifting balance of power. People are finally beginning to look beyond their household and increasingly making more personal choices of scale and import based on environmental impact and concern. This often means prioritizing ways of living and working that are less harmful to the environment, and in turn better for people’s physical and emotional wellbeing. It can also mean choosing an employer because of their stance on sustainability. By necessity, big corporates, and in turn governments, are having to prioritize facilitating this shift if they want to attract and retain the best talent.

Most recently, New Zealand (ranked no.11 in the index) has been one of the major examples of the big rebalance in power that’s taking place. Prime Minister Jacinda Ardern’s national budget balances goals that encourage the well-being of citizens (such as tackling mental health, child poverty, inequality and the environment) with traditional measures such as productivity and economic growth. Her rapid response to gun control following the Christchurch attack also asserted a genuine and urgent focus on safety and wellbeing that has set a new precedent and benchmark for other governments around the world.

There’s a growing opportunity for countries like New Zealand, and also smaller nations and cities, to compete with bigger counterparts who have more economic might than them on attributes like quality of life, tolerance and environmental concerts to attract greater tourism, trade and investment. It also serves as a warning sign for countries such as China, US and UK, who’ve scored lower in some or all of these crucial measurements, that if they don’t follow suit they’ll have to rely on doubling-down on economic might and power, which citizens, tourists and investors alike are growing increasingly less attracted to as a sole measure of country strength.

Dubai is now the number one city for graduates seeking a career in financial services, whilst London doesn’t make the top ten, reveals a survey by one of the world’s largest independent financial advisory organisations.

In an annual poll, deVere Group asks those who start its flagship Graduate Programme, in which location within the Group’s global network of more than 70 offices they would like to start their international financial services career.

This year, 28% said their first choice would be Dubai. The second most popular was Barcelona (22%); third is Hong Kong (17%); fourth is New York (14%); and fifth is Cape Town (8%).

The remaining 11% is made up of other destinations including Shanghai, Sydney, Geneva, Paris, Bangkok and Abu Dhabi.

deVere Group founder and CEO, Nigel Green, comments: “This survey highlights that the next generation of financial services professionals are open to look beyond the traditional and more established global financial hubs.

“It underscores how cities like Dubai, Barcelona and Cape Town are increasingly important international financial centres and compete with the stalwarts such as Hong Kong and New York.

“With this, as the apparent perception of the wealth mangers and advisers of the future, we can expect this trend to continue for the foreseeable future.”

He continues: “The fact that Barcelona this year is second-placed and London – currently the world’s most important global financial hub – does not make the top ten is interesting.

“Could it be that the respondents believe mainland Europe’s international financial centres offer more opportunities than post-Brexit London?”

Mr Green goes on to say: “These global hubs of finance, trade and commerce represent destinations of incredible possibilities for ambitious grads wanting to embark on careers as wealth professionals.

“There are some shared characteristics amongst these top five cities. These include that English is commonly spoken, they are politically and economically stable and there is a high level of high net worth individuals.

“But these destinations are also quite different from each other in terms of the lifestyle they offer and in terms of clients’ expectations, economic environments and regulatory conditions.

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“With each of the top five cities offering unique opportunities and challenges, each one attracts grads who have often quite markedly different strengths and weaknesses, skill sets and aspirations.”

The 18-month deVere Group Graduate Programme’s training begins at the Malta administration and support office, and graduates are then given the choice to attend an international deVere Academy, before full-time relocation when they actively start their careers.

The deVere CEO concludes: “deVere graduates don’t just witness our client-focused, values-driven, attention-to-detail culture from their side-lines – they’re an integral part of it.

“We like them to share their own personalities and perspectives, because together with our continual training and mentoring, it will allow them to become better financial advisers.”

(Source: deVere Group)

According to the statistics, Price Central London began to witness a recovery in Q2, both in sales volumes and prices. This follows 2 years of stagnation as buyers held back due to Brexit and residential tax headwinds. The increase in average prices, however, can largely be attributed to a surge of high value sales with buyers taking advantage of price discounting at the luxury end of the market. Underlying price appreciation for the rest of the market remains significantly less buoyant.

England and Wales and Greater London continue to see falling transactions and slower overall price growth, impacted by the introduction of mortgage caps, the instability in the domestic economy and the growing new build crisis.

Price Central London (PCL)

Average prices in Prime Central London reached £1,946,151 in Q2 2017, following quarterly price growth of 7.9%. Despite a slow down as the market adjusted to increased residential taxation and Brexit, this recovery is, in part, a result of buyers seeking safe havens in the face of increasing uncertainty as tensions mount in the USA, Middle East and worldwide, together with the attractions of weak sterling and low interest rates.

Transactions in PCL have strengthened marginally in Q2, following a prolonged period of falls from 6,044 in Q2 2013. According to LCP’s analysis, 3,885 sales have taken place over the last 12 months, representing a small increase in annual sales of 4.8%.

Notwithstanding the headline figures in Q2, a detailed analysis indicates that price increases have been buoyed by a number of significant high value sales, including £90m for a flat in 199 The Knightsbridge Apartments, the most expensive sale ever to transact through Land Registry. As a result, a particularly strong performance has been seen for the top 10% of the market with prices increasing 20% to average £8m. With this excluded, average growth falls from 7.9% to a more typical 4.5%.

However, whilst homebuyers have capitalised on luxury property discounts, a divergent dynamic is being seen in the lower value market. Price growth in the buy to let sector was the most sluggish, reflecting a 1.3% increase for properties under £810,000. The proportion of sales under £1m also decreased by 9%, compared with a 20% increase over £5m.

Naomi Heaton, CEO of LCP, comments: “The increase in average prices appears to reflect a greater proportion of high value properties being sold, rather than any significant underlying growth. Not only have we seen some very large individual sales but transaction data shows the £5m - £10m bracket was the most active in Q2 with a 23% increase over Q1. This can be attributed to international homebuyers taking advantage of notable price discounts, alongside beneficial currency exchange rates. The buy to let sector, on the other hand, is seeing a much slower picture as investors continue to adopt a wait and see attitude.”

“Looking at the monthly breakdown gives us a clearer picture of what is really happening in the market overall. Whilst bumper transactions boosted average prices to as high as £2.2m in April and May, which included the most expensive sale to register through Land Registry at £90m, June reflected a more sedate picture with average prices falling back to £1.65m.”

Greater London

Heaton comments: “Greater London is principally a domestic market and whilst prices continue to show growth, slowing sales volumes reflect the current state of the UK economy. Concerns around Brexit have impacted the ‘feel good’ factor which drives buyers’ decisions, whilst affordability issues resulting from caps on mortgage lending have hampered buyers ability to trade up or get onto the housing ladder. Falling sales volumes are also exacerbated by problems within the new build sector. This has seen international speculators pull back in the face of uncertain or negative returns. It is reported that the number of new building starts in London will fall to just 21,500 this year, meaning only 18,000 new homes will be built by 2021.”

England and Wales

Heaton comments: “Despite Government measures to reduce Stamp Duty for 98% of the market and schemes to promote activity such as Help to Buy, weaker sentiment and restrictions on borrowing continue to impact on the domestic market in England and Wales. With static price growth in Q2 and annual transactions levels falling a further 12.3%, the Government seriously needs to address the growing affordability issues within the sector and support the building of more low-cost housing for buyers. The artificial stimulus packages and tax reliefs do not appear to be reinvigorating new buying activity.”

(Source: London Central Portfolio Limited)

The UK’s financial sector is the biggest and most respected in the world, with the City of London acting as a magnet for investment and industry talent. Here Craig James, CEO of Neopay, discusses with Finance Monthly the potential impact the FCA could have through its engagement in fintech beyond the City.

Most recently the capital has been a hotbed of innovation in the financial technology – fintech – sector, with a number of start-up accelerators and new companies coming onto the scene to challenge the established industry.

But with the confusion over Brexit now firmly in people’s mind, many are concerned that London’s position as a leading financial centre and the focal point of the EU’s fintech industry may be under threat.

Other EU countries are beginning to respond to this and attempting to entice fintech businesses away from London and the UK.

As a result, the British government and its financial regulator appear to be doing more than ever to boost the UK’s share of the fintech market.

This is definitely a good time for fintech businesses, as governments across the world compete for their business, and this is even more apparent in Europe and the UK as a result of Brexit.

In one of its latest initiatives, the British government are looking specifically beyond the borders of London to help boost fintech hubs in the rest of the UK and encourage greater development of fintech across the country.

Expanding access to regulation beyond the capital

Britain’s financial watchdog, the Financial Conduct Authority (FCA), has recently announced that it is to expand its regulatory support across the UK in efforts to aid emerging financial technology hubs based outside of London.

Specifically, the regulator is looking to areas with both a strong financial centre and technology presence.

Historically, fintech business have predominantly come from London due to its proximity to tech funding and major financial institutions as well as government and regulatory bodies.

Looking around the rest of the world, these four factors have been key in the success of fintech companies.

But devolution of government, the rise of non-London tech hubs and the increasing willingness of banks to have a presence in other major cities around the UK, means there is greater potential for fintech businesses to spread far beyond London, just at the time the country needs to solidify and expand its position in the world’s financial and technology markets.

Speaking to the Leeds Digital Festival earlier this year Christopher Woolard, executive director of strategy and competition at the FCA, identified emerging hubs in the Edinburgh-Glasgow corridor and the Leeds-Manchester area as significant areas for potential growth.

The developing “FiNexus Lab” in Leeds – a collaboration between local government, industry, and central government – is laying solid foundations for fintech firms to flourish in the city, while in Manchester, Barclays’ “Rise” hub and “The Vault”, a 20,000 sq ft co-working space for fintech firms in Spinningfield’s business quarter, is improving the conditions for innovative firms to collaborate and grow.

The FCA has also been seeking to assist up and coming fintech businesses through its “sandbox” scheme, which helps firms to experiment with innovative products, services and business models.

About two thirds of the scheme’s first cohort was London based, but a rash of regional interest has seen nearly half of applications for its latest round come from outside the capital, highlighting the growth of fintech across the UK.

Non-London fintech companies are also seeing an increased interest in investment with Durham based Atom Bank recently securing £83m of funding from investors including Spanish bank BBVA, fund manager Neil Woodford and Toscafund Asset Management.

Not an entirely new trend

While encouraging new fintech companies outside of London has just recently become a focus of the FCA, it is not an entirely new concept and as far back as 2014 politicians, as well as financial and technology bosses, were calling for an expansion of the UK’s fintech sector beyond the boundaries of London to fully recognise its potential – long before the possibility of Brexit became a reality.

For instance, Eric van der Kleij, head of Canary Wharf based start-up accelerator Level39, has been one of the leading fintech figures suggesting that a business’ location isn’t a factor in whether it will be a success, pointing particularly to Manchester as a place where fintech companies were performing strongly.

One of the major hurdles, and a major barrier the FCA is now seeking to breach with its latest commitment, is that much of the regulatory framework emanated from London, with businesses based outside of this area – particularly those further towards the north and Scotland – struggling to get access to the kind of help they needed.

Speaking at the Leeds Festival, Christopher Woolard said the FCA now wanted to make it “as easy as possible” for firms to engage with the regulator and get access to the advice and help they needed to get into the market.

While many businesses have been able to set up outside of London and travel, sometimes great distances, to access this regulatory assistance, actively moving this help closer to businesses could be a significant benefit to new businesses, and a boost to British fintech at a time when it most needs it.

Increasing Brexit Britain’s competitiveness

The global fintech market is one of the fastest growing sectors in the world and, according to European Union figures, the value of investment into the sector reached $22.3bn by the end of 2015, a 75% increase on the year before.

Since 2010, large corporates, venture capitalists and private equity firms have invested in excess of $50bn into nearly 2,500 global start-ups since the start of the decade.

In the UK, the fintech sector – enveloping everything from online lending to applying blockchain to capital markets – is worth about £7bn to the economy, while more than 60,000 people are employed in the sector.

Looking at the UK’s global positioning, the country is second only to the United States in prominence on the top 100 fintech list, compiled by KPMG.

But while many of the UK companies on the list are London based, the highest based company, and the only UK business to breach the top 10, is based outside London.

The fact that a non-London business is the country’s highest valued fintech business is significant if we are to continue to convince new businesses to set up in the UK.

This is particularly important as other EU countries are attempting to take advantage of the confusion surrounding Brexit and boost their share of the fintech market.

A new public-private partnership, “House of Fintech” was recently set up in Luxembourg to attract companies to set up in the country, while French lobbyists have been making efforts to entice fintech businesses to relocate from the UK to Paris.

Even outside of the EU, steps are being taken to replicate the innovation and success being seen in the UK and The Monetary Authority of Singapore has moved to copy the FCA’s “sandbox” scheme to improve the prospects of its own fintech market.

With the UK’s future position in the single market still not fully known, and not likely to be defined for another year at least, the UK government knows it needs to maintain its popularity for fintech businesses.  These businesses need to be given an even greater chance to succeed if the UK is to maintain its strong position during the Brexit negotiations and fend off the competition.

We can expect to see further new initiatives from the UK aimed at making that a reality and more positive developments for fintech as European countries compete for their business.

With more than 30 years’ experience in the City, Kerim Derhalli, CEO and founder of invstr and a former managing director at Deutsche Bank and JP Morgan, talks to Finance Monthly about the upcoming UK General Election, hinting at the overall spread of its impact and the value of its consistency in a current world of uncertainty.

There has barely been a door knocked or a baby kissed since Theresa May surprised the nation with her snap General Election announcement, yet we’ve already witnessed our first gaffes, stumbles, awkward moments and grave predictions of the election campaign.

As if the past few months haven’t been turbulent enough, the curtain falls on the shortest Parliament since 1974 with voices from all sides of the political divide speaking of testing times ahead. In the right ear, we hear that Mrs May and co. are walking the line towards stability and a stronger negotiating position when it comes to Brexit. From the left, there are warnings of years ahead of Conservative strong-arming and marginalisation of the masses.

On the political front, we’re certainly set for a few more twists and turns before the UK finally makes its exit from the EU, but what does the changing face of British politics mean for the country’s economy or, more broadly, the markets at large? The answer: not a lot.

The City has long been battered, bruised, consoled and comforted by successive Parliaments, so the choppy waters which business leaders, investors and fiscal policymakers have been traversing is nothing new.

Does Brexit become clearer if Mrs May secures a stronger majority? No. Will banks rip up their plans to either relocate or stay in the City following the UK’s departure from the EU? Probably not. In the arena where invstr operates – fintech – disruptors revel in the unknown, finding any edge they can as the world changes around them – this will simply continue.

Concerns around the strength of the pound continue to circulate, but financiers know that currencies can be fickle. On that day in late April when Mrs May first announced an mysterious press conference, before dropping her bombshell, sterling first dropped to lows of 1 GBP = 1.17 EUR, before rallying to highs of 1 = 1.20. After yet another topsy turvy day, the currency closed just a penny higher than it had opened, and today has settled back to pretty much the same rate it was before the General Election furore began.

On the investment front, finance is still smarting from the 2008 global crisis. An air of trepidation reigns and many of the big players are cautious, making them less susceptible to risk. This means that the City is in robust shape when it comes to the fallout of Brexit, and the effect that this General Election will have (or not) on its future.

The repercussions from international businesses based in the UK are also unlikely to change. For every Goldman Sachs or HSBC that announces a move to Paris, Frankfurt or Dublin, there is a Deutsche Bank or Bank of America that has reaffirmed their commitment – and growth – in the UK. Even those who are looking at their options of moving their European bases have, beneath the headlines, opted to keep the vast majority of their workforces in London.

In this strange dystopian present, the one constant has been inconsistency, and many firms, big and small, in the finance world have learned to expect the unexpected. So, for all this change on the political and economic scenes, the City has actually become one of the more stable epicentres on which the UK’s global future continues to rest.

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