Sir Paul Newall, Lord Mayor of London
LONDON: THE LEADING CENTRE FOR INTERNATIONAL FINANCE
Chairman: John A. Campion
President, The Empire Club of Canada
Head Table Guests
Gareth Seltzer, Vice-President, Private Banking, Guardian Capital Advisors and a Director, The Empire Club of Canada; The Venerable Jim Boyles, Archdeacon and General Secretary of the General Synod of the Anglican Church of Canada; Robert Huget; Nick Chamberlain; Peter Davies, British Consul General; Robert Dechert, Partner, Gowling, Strathy & Henderson and a Director, The Empire Club of Canada; Sheriff Jeremy Gotch, City of London; and Her Worship June Rowlands, Mayor for the City of Toronto.
Introduction by John Campion
Niniveh and Tyre Annex London
The city is a romantic notion that conjures up such exotic historical places as Niniveh, Tyre, Athens, Rome, Alexandria and Venice.
In more recent times, the city has become one of the central units whereby humankind has sought to organise itself in its highest and most complex of structures. Indeed, it is difficult to imagine a central public policy issue in the world today that does not involve the city: population growth, communications, cultural and educational activity, transportation, politics, economic activity from capital flows to manufacturing and social issues including crime, poverty and the environment; the list could go on. Some would have it that our cities are on the verge of becoming ungovernable and others would have it that our cities are an example of the greatest flowering created by humans.
Whatever your view, there is no doubt that the major cities of the world have become as significant as many nation states. The citizens of Singapore and Hong Kong have created two of the world's largest economies, with no rural hinterland at all. For instance, Hong Kong has a per-capita gross domestic product of over $9,500, making the city far wealthier than Greece or Portugal. Los Angeles produces $250 billion worth of goods per year making it one of the largest economies in the world.
London is one of the oldest and greatest modern cities of our time. The British were the earliest urbanisers. By 1800, 25 per cent of that country's population lived in cities. From 1800 to 1850, England led the world in the annual rate of urbanisation with 36 per cent. By 1851, 38 per cent of the population of Britain lived in urban areas of over 10,000 and 50 per cent of the population lived in urban areas of over 5,000. The City of London was and remains the central urban area in the British development of urbanisation and one of the great cities of the world. Perhaps the greatest English economist--Jevons--best captured the power of the City of London in 1865 when he exulted in the euphoria of Empire:
"The plains of North America and Russia are our cornfields; Chicago and Odessa are our granaries; Canada and the Baltic are our timber forests; Australasia contains our sheep farms, and in Argentina and on the western prairies of North America are our herds of oxen; Peru sends her silver and the gold of South Africa and Australia flows to London; the Hindus and the Chinese grow tea for us, and our coffee, sugar and spice plantations are all in the Indies. Spain and France are our vineyards and the Mediterranean our fruit garden, and our cotton grounds, which for long have occupied Southern United States, are now extended everywhere in the warm regions of the earth."
In Canada, it has been suggested that, if Quebec ever separates, that Toronto should become a separate province. Whatever the outcome of this debate, it shows the enduring reach of the city-state.
The City of London runs from the Royal Courts of Justice in the Strand to Allgate in the east and the Thames River in the south to the City Road in the north. The Lord Mayor's position is an elected one, taking on a tradition that started in 1189. He has a role which is unique in the governance of cities in the world. He presides over the corporation of the City which has sizeable business and charitable functions; he is called upon to entertain heads of state when they are visiting Britain and has a major role to play in representing the City outside Great Britain in the world at large. It is an honour to welcome The Lord Mayor to our podium today.
Mr. President, Vice-President, Madam Mayor, Consul General, ladies and gentlemen: Mr. President, thank you for your kind introduction. I'm aware of the eminent role that The Empire Club has played in the public life of this great city and of Canada as a whole, and of the role that The British Canadian Chamber of Trade and Commerce has played in promoting our bilateral business links. I seem to be in very distinguished company today. I'm minded to quote Henry Kissinger, when he said that he hadn't seen so much wit and intellect in one room since he stood in the great hall of mirrors in Versailles.
Now you should know that Canada and Canadians have a very special place in the affections of all in Britain. Every schoolchild in Britain learns of this vast, exciting country with the relatively small but vibrant population. Here is a country which is the seventh-largest in the world in terms of two-way trade, a trusted member of the old Commonwealth, a nation which has displayed leadership in peace as in war--in Europe and in Britain. We have just this year commemorated the D-Day landings, as Canadians just have, and that has reminded us all of our shared dangers, shared sacrifices and shared values. And it has reminded us in Britain of the tremendous help that Canada's people, Canada's government and Canada's armed forces played in the freeing of continental Europe, and indeed in the survival of Britain as a free country. That's part of our shared history.
Today, Canada is part of the North American Free Trade area with 360 million people, the second-largest free-trade area in the world. But I'm sure you're aware that the largest with 380 million people and the geographically most compact is the European economic area. It'll be the fastest growing. Already a future expansion is planned with the participation of East European countries such as Poland, Hungary and the Baltic States, leading to a free-trade area of well over 400 million people within a few years. And this is, I suggest to you, important for Canada's perception of Europe as a growing, dynamic market for Canada's businesses and manufacturers and Canadian businesses that have invested in Britain have clear advantages and benefits.
In Britain, we have government policies which favour and encourage overseas investment. We now have the most modern, international telecommunications base in Europe. The U.K. is a low-tax country with the lowest corporate tax rate of the major European countries--33 per cent. Compare France with 34, Italy with 36 and Germany with 50 per cent. And now, the United Kingdom has the lowest unit labour costs. The index for 1992, taking in the United States on 100, shows the U.K. on 92, France on 112, Italy on 133 and Germany on 169. That's nearly 75 per cent more than the U.K. And just out is a report by international financial consultants Ernst & Young which reads: "North American companies are seeing the comparatively low labour costs and favourable regulatory-free atmosphere of the U.K. as a perfect springboard into the continental mainland European markets." The United States Department of Commerce statistics show that the cost of doing business in Britain is half of that in Germany. That's why BMW are now looking to invest in Britain. In 1993 the figure for working days lost in strikes was the lowest ever recorded. We have a work force ready to go to work.
So all this tells you, perhaps, why we have recently been the focus of so much new Canadian investment in Britain. Indeed, well over 50 per cent of Canadian investment in Europe has come to Britain. Our attitude towards overseas companies is a key factor. Attitude is important. There is no customer reaction against overseas companies in Britain. They have free access to government contracts and municipal contracts. They receive equal treatment in our courts of law. Once you set up shop in Britain, you're British as far as we concerned. Thirty-two foreign companies received the Queen's Award for Exports in Britain in 1993. A company doing business becomes one of us immediately. This is in marked contrast to some of our European friends.
The real decision makers today are in the boardrooms of multi-national companies across the world-investors, manufacturers, banks, securities houses, including those from Canada. They know that they have in Britain the finest international financial centre. These are the people who make the decisions to locate, to build plants, to acquire, to invest, to position their corporate headquarters and their manufacturing plan for the growing European markets. These decision makers are now asking hard questions: "What does the growing European economic area mean for Canada? What does the U.K. represent within the EEA? What does London represent?" Well, Britain is your best fast-track into Europe. Britain is leading Europe out of recession. We have low interest rates, low inflation and have now enjoyed eight quarters of uninterrupted growth. Britain welcomes Canadian investment, but as you know, trade and investment are a two-way street. Britain is the second-largest foreign investor here in Canada. In fact, British direct investment in this country is larger than that of all the European union countries combined with a total of $18 billion Canadian--which is, incidentally, three times that of Japan.
Now that's important to us in the City of London. The London financial market is a vital source of international capital for Canada. Indeed, in addition to that, U.K. residents and institutions holdings of Canadian bonds now total $24 billion Canadian. That's up from $6.3 billion in 1987. Indeed Canada is a major user of London's capital markets, and, of course, Toronto is the financial capital of Canada.
And London is now not just the financial capital of Europe. It has become, as the card in front of you all shows, the leading centre for international financial activity world-wide. London is the number one centre for foreign-exchange trading, for the daily turnover is as much as New York and Tokyo combined, and, incidentally, over five times that of Frankfurt. We are the world's leading centre for international banking. Five hundred and twelve foreign banks are represented in London, more than in any other city in the world. In our city, nine Canadian banks and securities houses alone employ 3,000 personnel. London is the world's leading centre for international equity trading, with 58 per cent of the global market and 90 per cent of the European market in cross-exchange dealings. We're of course by far the largest stock exchange in Europe. London is the home of the international bond markets, the only large multi-currency bond market in the world. Over $400 billion was borrowed through London in 1993 and so of course we are also the main centre for international bond trading, and for international cross-border mergers and acquisitions business. Within Europe, 80 per cent of all assets managed for institutional foreign clients are managed in London.
In the City of London, we house the leading financial commodities and options markets in Europe, the International Petroleum Exchange, the London Metal Exchange, the London Commodities Exchange, and the London International Financial Futures Exchange. Add all of these together and you have the broadest markets in the world. The London metal exchange, as you would know well, is the largest terminal market for base metals.
Most of the world's pricing for zinc, copper and nickel is based on the LME pricing mechanism. It does a huge business with Canadian firms like Falconbridge, Inco and Noranda. We have a thriving commodity exchange in soft products--coffee, cocoa and sugar--dealing in both options and futures. The International Petroleum Exchange is the only oil futures exchange in Europe. Our financial futures exchange is the second-largest in the world, second only to Chicago. Its business has enjoyed accumulative growth of 50 per cent per annum since 1982 and has doubled in the last 12 months. One of its strengths is that over 70 per cent of its membership is from overseas. And 10 to 15 per cent of its business originates in North America.
All of these markets are cleared by the London Clearing House (owned by the major clearing banks) which can assess the risk of individual areas across the board with a guaranteed fund of $225 million, the largest in the world. We have the largest insurance and re-insurance market in Europe, and the biggest in the world for aviation risks and marine insurance and we do 50 per cent of the world's ship-broking business. And all of this is supported by a comprehensive critical mass of international experts in international law, international insurance, international accountancy, international consultancy, international arbitration and actuarial work. Our commercial, contractual law is unambiguous, and is the basis of a growing percentage of world-wide commercial business.
All this depth and diversity is in one small square mile. As a telecommunications centre we enjoy the use of the most advanced technology expertise in the world. Canadian firms have contributed strongly to that. And it is no surprise, therefore, that Britain as a whole now houses by far and away more corporate headquarters than any other country in Europe.
London is truly an international city. Over 40 per cent of our financial work force is now employed by overseas firms. Well, why is this? A year ago a leading Danish diplomat said that there are three ways of doing things: the right way, the wrong way and the British way. But our way has been an open one, with a liberal, pragmatic approach to international trade. And that's been the way of the City of London for hundreds of years.
The most important thing to remember about London is that it has centuries of tradition as an international centre, stretching back to Roman times. Over those centuries, we have welcomed the Hanseatic league traders, the Flemish, the Huguenots and many others. The tradition distinguishes London from other centres. I've met and talked to over 150 overseas bankers in London in the last few months, and, as they put it to me, in London you have this stability of tradition and tradition of stability to ensure that overseas participants have always a warm welcome and, in most cases, prosperity.
These participants from abroad enjoy our housing on a human scale in London, our night life, our theatres, our restaurants, our great celebrations and our traditions. We have schools for all nationalities. London is a capital city full of learning, culture, sport and history. And we differ from other European cities in another way. Where else do you find foreign participants in the markets and institutions? Like Toronto, we're a great multicultural centre. A North American banker is now Deputy Chairman of our Stock Exchange. A German banker is Deputy Chairman of the Confederation of British Industries, London region. Sixty-nine per cent of the membership of our futures market is owned internationally. This is all part of our open-access internationalist approach, and this has helped to create truly a one-stop shop for international financial services. And the corporation of London, headed by the Lord Mayor, the local authority for the city, is dedicated to providing the optimum environment for the business community--an international business community.
The City of London and the corporation of London were not created by some administrative act or by Parliament. London is older than the British Parliament. They say that Westminster is the mother of Parliaments. You could say, of course, that Guildhall is the mother-in-law of Parliaments. But the city is not run by a set of rigid, bureaucratic rules. The Bank of England has always adopted an enabling policy to encourage overseas firms to participate in our prosperity. The City's world-wide success stems from centuries of developing financial and commercial life, of accumulating experience, of constant adaptation to changing markets, and, above all, of innovation to create new ones. We are indeed unlike any other municipality in the world. So for Canada, a major trading nation, Europe, the growing Europe, is important. In Europe, Britain is your best base. And, as Lord Mayor of London, I'm proud to represent the City which has the most international financial experts. We have so much in common and I'm so delighted to be here in Toronto with you all today. Thank you very much.
The appreciation of the meeting was expressed by Robert Dechert, Partner, Gowling, Strathy & Henderson and a Director, The Empire Club of Canada.