Putting London above the UK

The Financial Services Authority puts forward recommendations out on UK industry

The chairman of the Financial Services Authority has claimed this week that Britain’s banking industry is destabilising the economy and needed to be cut down to size. Lord Turner said the City watchdog should be “very, very wary of seeing the competitiveness of London as a major aim”. This remark induced comments that he had risked inflicting damage on London’s standing, namely from Stuart Fraser, chairman of policy at the City of London Corporation. “Other centres would dearly love to have business from London. If we want to shoot ourselves in the foot, they would be delighted to take the business,” he said.

London mayor Boris Johnson, however, stood on the side of Lord Turner: “Nobody in their right mind would want to do something that targeted London specifically. The City of London generates fantastic revenues for the government”. Alistair Darling and George Osborne have declined to enter the debate.

Is the time right to think about shrinking the City as a default response to the current situation? Should competitiveness be used as an excuse to defend “business as usual”, an opinion posed by Vince Cable? Contracting certain sectors may be a viable solution, but the attitude with which this is approached ought to avoid driving business abroad.

This caution, however, should not override; the economy shrank by 0.7 percent in the second quarter, a smaller reading than expected. Not to say that everything is fine and dandy - in the same period, France, Japan and Germany all emerged from recession. Some are even suggesting that Britain may return to growth before the end of the year:

Still, the figures do suggest that Britain is on the path to recovery and many analysts reckon the country could return to growth before the end of this year. “On the assumption that investment doesn't collapse again, I'm moderately optimistic we'll see positive growth in Q3,” said Peter Dixon, economist at Commerzbank. With the fourth consecutive month of rising house prices in August, the pick-up of the housing market adds to a week of positive statistics. It may still have peaks and troughs, but the market is currently looking healthier than before.

Maybe it’s because people are spending less on household goods, what with almost 40 percent of the Woolworths stores let or under offer since last year’s collapse being taken over by pound stores…