London and the UK’s leading status in the global financial system is “fragile”, the boss of Goldman Sachs has warned, as the government grapples with a tough economy.
Speaking ahead of a meeting with the prime minister, David Solomon – chairman and chief executive of the huge US investment bank – told Sky News presenter Wilfred Frost’s The Master Investor Podcast of several concerns related to tax and regulation.
He urged the government not to push people and business away through poor policy that would damage its primary aim of securing improved economic growth, arguing that European rivals were currently proving more attractive.
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He said: “The financial industry is still driven by talent and capital formation. And those things are much more mobile than they were 25 years ago.
“London continues to be an important financial centre. But because of Brexit, because of the way the world’s evolving, the talent that was more centred here is more mobile.
“We as a firm have many more people on the continent. Policy matters, incentives matter.
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“I’m encouraged by some of what the current government is talking about in terms of supporting business and trying to support a more growth oriented agenda.
“But if you don’t set a policy that keeps talent here, that encourages capital formation here, I think over time you risk that.”
He had a stark warning about the recent reversal of the “Non Dom” tax policy, which occurred across both the prior Conservative government and the current Labour government, which has played a part in some senior Goldman partners relocating away from London.
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Richard Gnodde, one of the bank’s vice-chairs, left for Milan earlier this year.
“Incentives matter if you create tax policy or incentives that push people away, you harm your economy,” Mr Solomon continued.
“If you go back, you know, ten years ago, I think we probably had 80 people in Paris. You know, we have 400 people in Paris now… And so in Goldman Sachs today, if you’re in Europe, you can live in London, you can live in Paris, you can live in Germany, in Frankfurt or Munich, you can live in Italy, you can live in Switzerland.
“And we’ve got, you know, real offices. You just have to recognise talent is more mobile.”
Goldman is understood to have about 6,000 employees in the UK.
Rachel Reeves is currently seeking ways to fill a black hole in the public finances and has refused to rule out wealth taxes at the next budget.
Mr Solomon expressed sympathy for her as her tears in parliament earlier this month led to speculation about the pressure of the job.
“I have sympathy, I have empathy not just for the chancellor, but for anyone who’s serving in one of these governments,” he said, referring to the turbulent political landscape globally.
Commenting on the chancellor’s Mansion House speech last week, he added: “The chancellor spoke here about regulation, she’s talking about regulation not just for safety and soundness, but also for growth.
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“And now we have to see the action steps that actually follow through and encourage that.”
One area he was particularly keen to see follow through from her Mansion House speech was ringfencing – the post financial crisis regulation that requires banks to separate their retail activities from their investment banking activities.
“It’s a place where the UK is an outlier, and by being an outlier, it prevents capital formation and growth.
“What’s the justification for being an outlier? Why is this so difficult to change? It’s hard to make a substantive policy argument that this is like a great policy for the UK. So why is it so hard to change?”
The Master Investor Podcast with Wilfred Frost is available across multiple podcast platforms
