It's that time of year again. We've a new champion for financial services and the square mile. Alister King is the six hundred and ninety sixth Lord Mayor of London. He's an aw set manager and former corporate lawyer and says his aim this year is to reopen London's capital markets. And Alster King is with us in the Bloomberg Radio studio. Good morning, great to see you with us now. Rachel Reeves hasn't speaking to Bloomberg ahead of her Mansion House
speech tonight. She says that the UK will consolidate pension funds but won't force them to invest in UK assets. Is this going to work?
Rachel Reeves is absolutely right that there needs to be real effort and energy put into a reforming of the pension system. We have had a too long a period where pension funds have been unreformed and I think that that's led to a an imbalanced system that we have.
It's also wasteful in the sense of we've had a big pool, the second largest pool of a pension pool in the world, yet we're not allowed to use those moneys to invest in some of the recesses that we have to invest into British innovation, and I think that there does need to be substantial change.
Okay, is this going to be enough? The comparison is being made, for example, to the Australian pension fund, I wonder whether that's a little bit misleading, the Aussie fund being something like forty years old and absolutely vast and deeply invested in Australian champions. I mean, surely the UK version cannot be compared to that.
No, but I think that there is a great opportunity for us is the fact that in the Australian system there are around fourteen of the superannuation funds. The number of pension funds we have here in the United Kingdom is around twenty one thousand. I mean, imagine the extraordinary duplication of fees and effort in having twenty one thousand different pension pots. I think the case for consolidation is there.
The idea though, of a consolidation boosting and having an effect on the UK is something. It's not a new idea, it's something that's been mentioned by previous chancellors as well, but we haven't seen much progress on it. How quickly can we expect to see results or to see if it's working at all.
I think that there is certainly a willingness to among the around the city of that there is a need to use some of these funds to invest into British innovation.
I think the you have this element that if you're all investing into one particular class of asset in the pension's case, largely fixed income affect, that becomes a riskier asset if everyone's in it, and so therefore I do sense that there is a need for diversification and also there's a need to use some of that vitality in order to invest into risk assets.
Are you against the idea of mandating funds to invest in the UK assets?
I mean, I think it would need to have a substantial change in the law in the sense that pension fund trustees do have fillocy duties to try and find the best returns, and so therefore if they are if you do want to mandate, then there has to be it has to be a legal element. But I think that certainly, I think the mood music out there within the financial community is that there is a much more willingness to invest into UK assets now, and it may be that certainly I would say incentives to go ahead
and invest into UK assets rather than mandation. Maybe a way forward.
What would does look like?
Well, I mean I think that we could look at I'm something I would be talking about later on in the match and house banquet today, and that is this idea of the of you know, cash ices for instance. You know, we're getting all sorts of possibilities in the relation to tax breaks. You know, why are we incentivizing people to invest into into cash, a largely non productive asset. Why don't we give higher tax incentives to invest into
into UK public companies? You know, that might be something that I'll be rating with the Chancellor today.
Yeah, okay, that's interesting. But I mean, if I may, those potentially are really quite small tweaks versus the twenty to thirty year decline in investing in UK assets that we have seen. The S and P five hundred has tripled in value in the past decade, the fifty one hundred has been flat. Shouldn't we just give up on the idea of boosting the London market except that it is in decline and actually focus on other businesses where the London has real strength.
No, I don't agree. I think that there is a case for the London Stock Exchange and quoted assets here in London. If we are serious about being a global financial center, which we are, then we have to have a really functioning, all powerful stock exchange. And just to your earlier point, in relation to that cash actual point, it's not really tinkering around the edges. The market capitalization
of the London market is around two trillion pounds. The amount of money in cash isces is two hundred and fifty billion, so over ten percent of the market capitalization. There is a decent amount of money to go in there that potentially could be utilized.
How much harder is this mission to revive the capital markets in London now that Donald Trump is in power in the United States and the ensuing market reaction you know the dollar or two year high.
Well, the city did pretty well under the last Trump administration. I think that there was and so I don't think it's not a zero sum game either fatally, it's more I mean, I sent it provides different challenges and different opportunities. And there are of course some parts of the world that don't want to be listing. For instance, in New York, they wanted list perhaps elsewhere. So I do sense that there are opportunities for us, and we're big enough to take advantage of those opportunities.
Do you see any signs of companies based here in the UK working here in the UK on showing or reshowing into the US now.
I haven't experienced much of that in the course of last week. People have not been mentioning that to me. In really too that certainly in relation to the areas that I work in. It's something that potentially could come till later on, and I think it's up to us to try and make sure that the city remains very vital, properly regulated and a great opportunity for investment.
Does the UK avoid tariffs by dint of I mean you've talked about, you know, perhaps the UK doing a little better under Trump or the last time around. I mean he's a slight angler file perhaps also thanks the fact that we've got a services driven economy. Does the UK avoid tariffs or the big hit that we expect for Europe.
I don't think that will avoid them. Let's see what is in the detail of the legislation rather than we're dealing on rumor at the moment. But I do sense that the British economy is well set up giving its services bias to avoid the full front of tariffs.
You're welcoming Rachel Reeves to Mansion House later for this speech. I think it's fair to say that a lot of the decisions in the budget haven't gone down terribly well with businesses, things like the rise in employers national insurance contributions. What's the financial services community saying about these things?
I mean, I think that there is I've heard the criticism, it is out there. I think there is, which is interesting. I think on the other side, though, there is something that's been lacking perhaps for some time, and that is there is some stability, and I think that the stability that can give rise to people starting to make long
term capital budgeting decisions. And so therefore, though perhaps some of the fiscal landscape has changed, there is the possibility that for the next five years they know pretty much what's going to happen, and so therefore they can then take that into consideration when they're working out that expansion. Also, I would say that I don't see a fall off certainly in the financial professional services people that I have spoken to in their investment plans in job creation. No,
I don't think it will in these sectors. I think it's different in other sectors out there, Hospitality, you know, there may be some problems. But I think financial professional services, which is in my Baileywick, I think that the impression there is that it's still a still a positive place.
Okay. Having said that, perhaps that may not be so surprising when you think that Rachel Reaves and the Labor Goulment do seem to be listening to the city in the sense that she's talking about consolidation but no mandate, which was kind of the big overhang and the big worry. Now, though, is she going to come to Mansion House and actually ask the City of London, press the City of London to deliver on economic growth because that is her pitch, isn't it, Private businesses deliver growth.
I'm sure she will do exactly that this evening, and she will be asking the city to do that. And also I think she's right to ask it because effectually, I sense the city and the financial professional services sector in general, that's where the labor government are going to get their growth in the short term. Effectually, because the building's already built, that the people are already trained. The
missing element is confidence. In my view, I think there's obviously some things to do in relation to regulatory reform, and I'll be talking with the Chancellor about that today.
So is this a pro business a pro financial services government?
Well? I think that the thing that I my job as Lord Mayor will be to try and boost confidence within the sector in order to get people to take investment decisions in order to provide some of that growth.
Has the city completely moved on now from its challenges over Braxast? Has there We know that there's discussions aren't going about perhaps improving ties, but there are some looming dadlines as well in issues like clearing that could pose further challenges.
I would say yes. Brexit has scarcely featured in some of the questions that I've had over the course of the last a few days. I've been in office since Friday, and it hasn't come up. I think also the further away you get from London as you go around the world, the less again sort of where Brexit comes up as a matter. I think that the course is set and so therefore I think that's there are other things to be concerned about.
A final thought though, in particular the non doms issue. We spent a lot of time thinking about that and tracking the number of people who were leaving the UK. Do you think that there will be more of those because of the tax changes from Rachel Leaves.
What I've seen is that that people who have left, and we are aware of them, some leaving, largely their businesses are remain remaining here in the United Kingdom, so that I have not heard of businesses leaving because of somebody's tax affairs. And plus also I think there is a great desire along many of them to return at some stage. But I think that where we've got an opportunity is the fact that forty percent of people who work in the city of financial preacial services in the
city are born abroad. Of it, we have to make sure we've got a really competitive fiscal land escape for them to stay here, to scale here and invest here and visas.
Is that an issue.
I think it's certainly something that we need to be working with the Chancellor and others in government to make sure that we're right. But I think that that's less of an issue now than perhaps was eighteen months ago.
Alistair, thank you so much. For your time this morning, for taking all of our many questions. Alistair King is the Lord Mayor of London six hundred and ninety six. I hope that you're going to become a friend of the program as your predecessors have been. Michael Minelli, that you're taking over from. Hope we'll see you again very soon.