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Anthony Hilton: What went up could come down as Jeremy Corbyn scares City

A Jeremy Corbyn-led Labour government could lead to some changes for businesses
A Jeremy Corbyn-led Labour government could lead to some changes for businesses / PA
By
24 January 2019
K

en Griffin, founder of the Citadel hedge fund, bought a house in central London this week, next door to the Foreign Secretary’s residence. The property was originally mooted to go for £145 million, but for the past two years it’s actually been on the market at £125 million — what a snip.

Griffin, splashing the cash again in New York today, bought the London home for £95 million, not because the previous incumbent was such a pain — I assume — but because even central London properties are not what they were. Brexit and tax changes have taken the gloss off upmarket homes.

According to Savills, the estate agent, billionaire prices have dropped at least 18% since their 2014 peak. This sale suggests an even bigger fall, though that was just the asking price.

And it has history: it was the home of French resistance leader Charles de Gaulle during the Second World War and then an MI5 office which they used to impress new spooks before sending them to less salubrious places. But it was privatised and found its way into private equity ownership and now a hedgie.

I wonder though whether Griffin will get his money back, in spite of what seems on the face of it to be a keen price. The last time this house was sold in 2013 it fetched £63.5 million. A lot has been done in the interim — pool, staff quarters, landscaped gardens and so on — but even so.

There is a view, particularly among Brexiteers, that London is the capital of the world and nothing will change that. The rich and the powerful will continue to live here, and the City, fintech, the media and professional services will continue to thrive.

But there is another view which remembers London in the Seventies and Eighties when it was anything but glitzy. In fact it was pretty squalid.

This view is that London does not have a divine right to exist in a gilded cage. They say it would be just as easy to slide down the greasy pole for 30 years as it has been to clamber up it.

I have no idea who will triumph but I do wonder. In the mid-Eighties the City had its Big Bang and cash poured in from the rest of the world to take advantage of the City’s opening up. A new agency, London First, was set up to try to present the case for the capital, and made a big thing of foreign firms moving their corporate headquarters to London. That was a big breakthrough.

Technology, the collapse of communism, the emergence of China and globalisation all poured fuel on the fire. London smartened up and became an international city.

But the City fathers — the Bank of England, the FSA, the City Corporation — were also aware that what had come here in the past few years could just as easily leave again. So they lobbied government, successfully, to make the Square Mile much freer to operate than New York.

They saw light touch regulation, low taxation, and an open-door policy for non-Brits as vital. The Government responded. Capital controls had been abolished and the British, who had previously gone overseas as part of the brain drain, stayed here instead. Nothing was done to upset them or the apple cart.

It worked well. But then the 2008 financial crisis put a stop to most of what the City was good at and made the Americans dominant.

Goldman Sachs and Morgan Stanley have triumphed in mergers and acquisitions; JPMorgan and Citi are unsurpassed in global banking. Vanguard, BlackRock, State Street and Fidelity are the global asset managers. Private rather than public equity holds sway in fundraising and most of that is American. European banks have to scramble for dollars — which the Fed generally gives them at the moment — but that means they have to follow the Trump rules on Iranian sanctions.

Now, as well as Brexit, there is Jeremy Corbyn. It is highly likely that, with the help of the Scottish National Party, he will form the next government. I doubt whether he will actually do much about public ownership — but with the support of the SNP he could certainly put on a mansion tax.

If he also really tries to stop money-laundering in the City then a large contingent of Russian, Indian and Chinese “businessmen” in London and their assets might get very uncomfortable. They might well not want to stay here.

Now I do not think that the City will up sticks and go to New York, Shanghai Frankfurt, or Amsterdam on day one. But they might over time.

People will look where the opportunities are and London — having shot itself comprehensively in the foot — is less likely to be one of them.