“Business leaders call for less red tape” is one of those “dog bites man” stories that would not normally make the headlines. The surprise in the latest survey of bosses by the CBI, the British business association, and KPMG is that increasing regulation is not considered the biggest threat to London’s competitiveness. (Business leaders grant that accolade to under-investment in the British capital’s infrastructure.)
A further surprise is that the serious regulatory fumble that led to the run on the Northern Rock bank does not get a mention. That must be due to the timing of the poll, which was carried out both before and after the September 14 announcement of government support for the mortgage lender pushed the crisis into the news. Since then, the anecdotal evidence has grown that the Northern Rock débacle could pose as big a threat to London’s reputation as any of those mentioned in the CBI’s survey. Lord Jones, former head of the CBI and now a trade minister, mentioned it in New York on Wednesday. Sir David Walker, a former regulator and City grandee, cited the negative Rock effect in an FT interview last week. Leaders of the financial services industry say they hear such concerns wherever they travel outside the UK.
The disaster poses a double-threat to London. One is the direct knock to its reputation. There, the damage is already done. But the other, more insidious, menace is that, in attempting to prevent a repeat, government and regulators may wrap an extra layer of red tape around UK-based business, just at the point when financial centres, from Shanghai to New York, are mounting a counter-attack on London’s recent pre-eminence. And to think that, six months ago, complacency was probably the biggest threat to the UK capital’s prospects.