180: “News of Our Demise Has Been Greatly Exaggerated.”  Why the City of London Remains a Globally Potent Force - With Sir Alastair King, Lord Mayor of the City of London

0:02Welcome to the Money Maze podcast. If this is your first time joining us, I'm the host, Simon Brewer. And in this show, we talk to proven leaders and thinkers from the worlds of business, investing and beyond.

0:16Sir Alastair King:To stay up to date with every episode, please do sign up to our newsletter via moneymayspodcast.com. Episodes are also published on our YouTube channel and we're active on all major social media platforms. Thank you for listening. Amidst the relentless drumbeat of pessimism surrounding the UK and London's financial services sector, the challenge isn't to resurrect a bygone era, but to reassert London's enduring and distinctive strengths. Today, to examine the state of play and discuss some of the myths and the challenges, we're delighted to be here at Mansion House in the City of London and to welcome the Right Honourable Alistair King, Lord Mayor of the City of London.

1:04Welcome to the Money Mates podcast. Thank you. Lovely to be here. Well, for those watching on our YouTube channel, they are going to have more of a treat than for those just listening on Spotify and other platforms because we are not in our very nice studio in Marlebone. We're here at the very palatial Mansion House. and a quick history lesson, if I may. Why is this building called the Mansion House? Well, I mean, it goes back a long way. It's built in 1752 and it's been the home of Lord Mayor's ever since then. I do like to think, though, to say that it's a, it has 1752 style air conditioning, which is just opening a window and sometimes there's 1752 style plumbing because there isn't always the hot water that you want.

1:51But look, it's a remarkable place and it's a great place to convene people. If you get an invitation to go to Mansion House to do things with the Lord Mayor, people often come. And that's a great asset to have to be able to bring people together. Well, I did attend a dinner here when Michael Bayer was in your role. And I just mentioned to you that back a long time ago when I was with the Honourable Theory Company, I did the military parade here as well. So it's a treat to be in the building. Can you just explain the historic and current role and responsibilities that you have? Well, the role of Lord Mayor goes back a long way.

2:28It goes back to 1189, so 836 years. It's gone through many iterations in that period. The current iteration, though, the current responsibility is to be the global ambassador for United Kingdom's financial, professional, legal and maritime services. and there are two elements to that and one is to go go around the world attracting as much foreign direct investment into those sectors as i possibly can because there's enormous interest in those sectors but also using my size 12 boot to kick british businesses to ask them to be so much more ambitious to be much more dynamic to raise their horizons to go to the places in the world that are growing at five six seven percent that's where the response extraordinary opportunities lie.

3:10Plus also, I think they'll find when they get there, so many people want to do business with UK counterparties. You are on the road or in the air at least 100 days a year and dining and you've got President Macron here next week. And just before we do that, your background, as I understand it, you've been in the law, you've been in buyouts, you've been in infrastructure. How have those key skills armed you? I'm very lucky because, as I mentioned, the job description is to be the Global Ambassador for UK's financial professional legal maritime services. I started off life as a lawyer in the city.

3:45I was in big law firms here in the city. I then did early stage venture capital. And off that, I did a buyout fund, which went very well. And then I now have my own fund management business and run a number of different funds with some strategies through that. So I've had a good background in both financial and professional services, which I think has been very helpful. plus also some of the areas that I have experienced during the course of my career, I've been able to bring through into the mayoralty. And I hope we can discuss that later. Right. So framing this London debate, London continues to be the second financial center of the world.

4:20The Global Financial Centers Index, the GFCI, continues to show London unquestionably as Europe's top financial hub. And as I did some work to sort of, I suppose, challenge some of the narrative that's been less constructive, You know, the methodology acknowledges that once there are centre achieves financial and critical mass in everything from infrastructure to institutional trust, it becomes very difficult to dislodge. Let me ask you the question, why do you think that the narrative has been less optimistic? Well, I mean, I think first of all, I'll just say that it's not just it's a slight misnomer, the Lord Mayor of London, because it's not just a London based role.

4:58It is a, I am the global ambassador for all the people in financial, professional, legal, maritime services throughout the country. So that's 2.4 million people, one in 13 of the workforce responsible for about 14 % of GDP. So it doesn't matter where those services are rendered, whether it be Leeds, Manchester, Edinburgh, Glasgow, Belfast, it still falls under my responsibility. I think the other thing I would say, though, is that although some of the flows are sometimes bigger in New York or greater than New York than they are in London, they are primarily domestic flows in relation to the United States.

5:35The extraordinary strength that London has is that the great majority of the flows in London are international flows. We are absolutely the global centre. And I think there's a lovely expression which I use around the world. And that is, if you want to meet Americans, go to New York. if you want to meet the world, come to London. And it just gives the idea of the real strength in the global aspect to London. And although we can look at whether it's foreign exchange, transactions where more take place here than anywhere else in the world, or swaps or etc., there are those two other big industries that get less attention, perhaps because some of us come from the asset management industry, which are maritime and insurance.

6:12Just give us a sense of their position. I think certainly in relation to the insurance sector here in London, We are the global centre for insurance, particularly when it comes to insurance innovation. We have extraordinary numbers of people. A third of the city workforce is insurance related. Incredible innovation coming out of those areas. We have a number of delegations coming in on a weekly basis, wanting to learn more of how London has this extraordinary centre of strength in relation to insurance. We also, I would add, legal services. We are almost unquestionably the centre of the legal services world.

6:51We still have this enormous percentage of international contracts that are done under English law. And I think you look at the starting salaries of solicitors here in London. They are eye-watering, certainly compared to when I was around. But it gives you an idea of I feel like a 1950s footballer. In fact, I was really good at a time before money came into the game. But I just think it's a function of the fact that so many people want to employ UK or English solicitors. I say those are two plus foreign exchange you've already mentioned. Those are areas where we're number one. We're a very good second in relation to asset management and banking.

7:27So we're absolutely competitive when it comes to when you total all those up. You look much better than a 1950s footballer, let me say. But whilst we may be suffering, if not myopia, a large dose of self-criticism, as you travel to so many of these countries, how are they viewing the UK? I mean, obviously, we know the traumas of Brexit and other. But is that, you know, do you see a sort of almost a dichotomy between domestic pessimism and external other? Very much so. Certainly, when I've gone around the world, I've been to 16 countries. So far I have another eight or nine to go in my overseas programme.

8:06It's absolutely universal that people want to do business with UK-based counterparties. We do what we say we're going to do in general terms. We do it really well. And if there are problems, we've got a really fantastic dispute resolution structure behind us. I think there's a real desire to do things with UK-based counterparties. so reform is on the lips of everybody and we're sitting here we're going to talk about the mansion house reform but just gives a sense of what are the most important reforms that are being undertaken right now i think that there are obviously some some significant uh regulatory reforms that we're doing i think that's um it's certainly it's great uh uh honor to be part of some of the processes there we've uh when we either we're working with government in relation to making suggestions on ISA reform.

8:54These are trying to get more money into the productive parts of the economy. So that's one element. The second element, though, I think is working with industry to try to do a series of voluntary reforms. Examples, of course, is an example is the Manchin House Accord, which we were able to sign with the, I was able to sign with the Charter Exchequer on the 13th of May, coming together with 17 of the largest pension funds in the United Kingdom, responsible for 90, 90 % of the defined contribution pension market. And that's a commitment to invest 10 % of their investable funds into alternative assets between now and 2030.

9:31And that's a decent amount of money. It's£100 billion or so, so it's thawed. And 50 % of that into the United Kingdom, 50 % around the world. So that's an idea of getting people into a room and working out what can we do as an industry. And the Lord Mayor can very much play a part in that. So before we continue this conversation, we're going to take a short break to have a note from our sponsors. IFM Investors is a global asset manager, founded and owned by pension funds with capabilities in infrastructure, equity and debt, private equity, private credit and listed equities. They believe healthy returns depend on healthy economic, environmental and social systems.

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10:55So you've got that quite interesting duality of that 10%. It's a big number. This is a significant undertaking. And we had a question. So Pete Davis of Lansdowne, one of the UK's most successful fund management firms, is launching his UK growth equity firm right now. He said, is there the possibility that for all this capital, there aren't enough opportunities? I mean, I think that I certainly don't see a shortage of opportunities, particularly when it comes to things like innovation. Look, extraordinary innovation coming out of UK universities. We have a remarkable sort of strength in that area.

11:30Something that I'm doing as Lord Mayor is to do a Scottish Investment Summit, highlighting some of the remarkable opportunities in financial services, life sciences and renewables up in Scotland. It underlines the national nature of my role. And I just sense that there are some extraordinary opportunities there. I think what we're trying to do is to make sure that UK-based investors consider the domestic investment opportunities as well as those abroad. And actually, we had Greg Smith on, who is CEO of the IP Group recently, talking about the monetization opportunities coming out of Oxford. And it is, you know, it's very exciting.

12:06Now, just staying with that mansion house, you know, reform, we've had the disadvantage of starting late. But we've had the advantage possibly of watching countries like Canada or Australia that have consolidated pension funds. What would you say are those key takeaways? It's been really fascinating. I've spent time as Lord Mayor both in Australia and in Canada looking at the pension reforms that they've made. And we have the biggest example I can give you, of course, over in Australia, they have 14 superannuation funds. The equivalent figure in the United Kingdom is 21 ,000. So I do imagine the duplication and all that type of thing there.

12:44So I think certainly one of the takeaways is the need for consolidation. And I think the industry is aware of that and the government are aware of that as well. So I think that's something that we will see. But I just think also the idea of persuading UK-based pension funds to be much more active in relation to looking at innovative businesses in the AIM market. These are all opportunities to look at infrastructure, to look at other private investment classes. There are all sorts of opportunities there and I think it's something that the moment has come for them to look at it. And do you think, using a historic lens, that there's been a loss of risk appetite in this country?

13:22And if so, how does that get addressed? Well, look, I think that it's very much part of the theme of my mayoralty is to try and get a bit more calculated risk back into the city. I think there is an absolute sense that we have become too risk averse. And a lot of people seem to blame regulation in that respect. And regulation, of course, plays a part. But I can give you a number of examples in relation to where, Effectively, it's our mindset that's actually sort of that's the impediment. You know, the fact that we are looking at all sorts of growth areas around the world in difficult countries, difficult jurisdictions to do business.

14:01But the opportunities are there. And it's a mindset reason why we don't go there in the way that we used to, rather than a pure regulatory one. And there is, of course, the argument that's put from time to time is that the UK needs a sovereign wealth fund. But actually, do we have all of the components? And that's not a really very logical argument. I mean, it's a part of the solution. But goodness me, we should not need to have, you know, we should not be waiting for a sovereign wealth fund to be created and then properly funded before we jump on planes and bang on doors. My big message to city-based businesses is that we've got to get back into the habit of jumping on planes and banging on doors in the way we used to.

14:40Can I give you one example of that? And that is I was in Mumbai and I was sitting in the office of one of the big patriarchs of Indian business. And effectively he said to me, Alistair, where are the Brits? I used to have a Brit in my office once a week. I now have a Brit in my office once every two months. And effectively, that's India where we have all sorts of ties, economic, social, cultural and also sporting ties. And yet, you know, somehow, you know, we've just decided India is a bit difficult. India is growing at 6.5%. If your economy is growing at 6.5%, your economy is doubling every 11 years.

15:16That's the sort of wagon that we should be hitching our economy to. And I just think we must do more in order to go do more things in places like India. Yeah, and we just interviewed Peter Frankopan, who said he was on a flight last week to Kazakhstan. It was full of French business folks. And Maloney was there the next day. There were no Brits. So, you know, absolutely. And this is, you know, there's a sort of irony. We sit here in a place that's been an entrepôt for so many years. And yet there's that. As we look forward to a revolution, which is going to embrace all sorts of technology, UK appears to have quite an important senior leading position in the world of fintech.

15:50And just reflect on those newer industries and how they play their part in what we're doing. We have extraordinary leadership in relation to financial innovation. We have a good regulator that's come up with some great ideas, such as the regulatory sandbox, which allows nascent companies to try things in a controlled regulatory environment before they launch it on the public. We have all the ingredients there. The bit we're missing, it's all right on the startup side, not so good when it comes to scale up capital. And that's the bit we're trying to do more in order to attract scale up capital into those businesses.

16:27And the problem that the UK is known for is having had those great ideas and they've started to grow, then they get absorbed or taken to the US. I mean, that's practically what would you like to see done to try and do that? I can give you a precise example. We've done a series of scale up capital events here in Mansion House. And there we've got between 18 and 22 really good technology businesses, British technology businesses, presenting to around 200 UK based investors. investors. Now, rather terrifyingly, there aren't many other similar types of events. And so, therefore, I will be doing many more of these during the course of my mayoralty.

17:05I hope and expect that my colleagues who succeed me will take those on as well. And I think in other guises, we'll do more of that because I think there's a real need to get British innovation in front of British capital. The idea where money meets opportunity. And I think the Mansion House is a wonderful place to convene those types of events. Now you mentioned about the work you're doing in Scotland and you have Scottish roots. George Osborne was obviously very keen and had this idea of the sort of Northern Powerhouse. How do we think about those, about whilst London is magnificent and so important, the necessary stimulus to those other conurbations?

17:40Yeah, well, I mean, we have to do it. There are so many good sort of centres of expertise when it comes to innovation. They're not all in the south of England. And so therefore, certainly on the university side we need to make sure there's proper backing again scale up capital for for great ideas coming out of universities in you know say you know Strathclyde, Edinburgh, Glasgow but also you know sort of extraordinary things coming out of Manchester University and other places and I just think these are the sorts of this where you're touching the white heat of the new technologies you look at all the in the northeast the strength on the sort of graphene side and all these types of elements these are absolutely groundbreaking technologies.

18:20statistic I can give you is that there are more satellites made in the central belt of Scotland than anywhere else in the world other than California. It just gives the idea we have remarkable expertise that we don't do a song and dance about. And I just think there's an opportunity there that British investors should not miss. And you and your predecessors have engaged with multiple political parties, regimes, etc. How, describe that interaction in terms of given the absolute necessity of what you are doing and the requirement of governments to get growth? We've had a very good relationship during the course of my tenure with government.

19:04I think there's been a great symbiosis. The Department of Work and Pensions were very helpful in relation to coming up with this Mansion House Accord. They saw when we set out what we wanted to do, they saw the need and the necessity and so therefore lent their support. And I think there are a number of other areas where we have worked extremely closely with government. But of course, occasionally we're critical as well. And I've gone into print myself being critical of some elements of government policy. And I think we have a good relationship, a mature relationship where we can make some suggestions.

19:41And if you were sitting in number 10 rather than a mansion house today, what would be the two things that you would want to enact quickly? Quickly, well, I'm worried about the capital flight in relation to, and I would do some form of reform in relation to the non-DOM rules, particularly on the inheritance tax side. I've gone into print of saying that's something that I think needs to occur. But I think if you look at some of the other areas where we have all sorts of opportunities in relation to continuing the pension reform element. We have the second largest pension pot in the world. We're sitting here.

20:17We have over the course of the last 20, 30 years through perhaps the law of unintended consequences. We've stopped that pension pot investing into some extraordinary British opportunities and opportunities around the world. And I think that we need to continue the process of allowing those extraordinary amounts of money to be deployed for the better outcomes for UK pensioners. schroder's is a leading provider of active asset management advisory and wealth management services recognized as a leader in sustainability few investment managers can match the combination of capabilities and global reach that schroder's offer across public and private markets schroder's offers distinctive investment solutions for the diverse needs of wealth pension and insurance clients and the other owners of long-term assets providing excellent long-term investment outcomes when Schroeder succeeds for clients, society and the wider world benefit too.

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21:56So one of your predecessors had a question, which is always like sort of falling in the footsteps of a former headmaster, isn't it? Which was Sir Charles Bowman, who said the juxtaposition of being the guardian of historic purpose while steward of modern purpose. What best example illustrates this? I can give you a wonderful example. Happened just the other day. And I was part of launching the UK Tech Week, a remarkable event. Thousands of people coming from around the world descended upon London. We had 125 different delegations from around the world with thousands of people. I was launching one of the main events for it.

22:34But the timing was such that I did not have time to get from the place where I was making the speech back to here to Mansion House for dinner. And so therefore I had to go changed in my aldermen's and Lord Mayor's outfit, which you wear for dinners. So it was very strange to be talking to this room full of these incredible technologically advanced people, talking about the strengths of London, the deep pools of talent, the technological advice, the technical expertise there, and the expertise in relation to quantum computing and all the other elements. And I was doing that whilst dressed as King Louis XVI, effectively.

23:14And you just sense that it's a remarkable juxtaposition of the ancient and the modern. So you are, I think, the 696th Lord of the City of London. Your tenure is for one year. How are you trained and how do you train your successor? Well, I mean, I think it's a one-year term. It has advantages and disadvantages. One advantage is you come, the new incumbent comes, you're really fresh, brimming and fizzing with ideas. And therefore, you've got to get on with it. You start sprinting, which I think, and that has a great opportunity to inject energy and vitality into what we're doing. The disadvantage is that how much can you achieve in one year?

23:55And I think the only way you can really make sure that it's a significant amount of achievement is if you're linking in with what your predecessors are doing, taking forward some of their ideas. And certainly the Mansion House Accord, which is where I put a lot of my energy earlier in the year, that was building on something called the Mansion House Compact, which was something that was promulgated and executed by my predecessor, but one, Sir Nicholas Lyons. And so you build on each other's success. I hope and expect that my successes will build on some of the things that I've been doing. I had a question from a former senior executive at Merrill Lynch, Dean Paddock.

24:34He said, this work from home issue, what are you observing now? Well, I mean, I think that there is a, obviously, a movement back to the office. In my view, it can come fast enough. We do not do that well enough here in London. The opportunities to learn from your colleagues to spark ideas is so much better when we have people together in offices. Plus also the whole ethos of the City of London is this extraordinary cluster of clusters. So many interdisciplinary sort of remarkable people are thrust together, sparking ideas off each other. That's where the real magic happens. That's why the City of London has progressed and done and prospered over so many centuries.

25:23And I just think we dissipate that by working from home at our peril. And I like that expression, cluster of clusters. And in the epicentre of that are these livery companies. Now, for some of our listeners, understandably, they won't know those. They play a really interesting role and they represent a lot of capital. Can you just give us a flavour for why they are so important? They're absolutely part and parcel of the fabric of the City of London where we're sitting. They played a part in the development of London and its commercial ties around work. They're the old trade guilds and they were specialist guilds for the various different crafts and professions.