Local innovators lament the City of London’s failure

   0   0 Blog

financeraceCross-posted from the Treasure Islands blog:

From the Financial Times, a short video entitled Bright Future for British Engineering? It looks at some promising stuff going on in the Advanced Manufacturing Research Park, a collaboration between the University of Sheffield and Boeing Corp.

The video is notable not just for the fact that the t-word is absent. Nobody seems to be talking about tax subsidies: they are too busy getting on and making stuff and innovating. But the main point I wanted to make now was about a company called Icetope, which apparently makes liquids that can be used to cool computer equipment, without messing up the innards. The reporter dunks his phone into the liquid, just to prove the point. But it’s the short interview with Icetope official Peter Hopton that illustrates the point for me:

FT: Despite the strength of London’s financial centre, Peter Hopton said he had to look overseas.

Hopton: “We’re very good at inventing stuff: but not so good at commercialising and turning stuff into big businesses with big visions. We have a difficult funding culture here in the UK, compared to, say, Silicon Valley. When you have a something that has a big international stage for it, the funding seems to flow over the borders and into the UK.”

It’s a useful anecdote to illustrate what Martin Wolf pointed out in the Financial Times recently:

“As of August 2013, loans outstanding to UK residents from banks were £2.4tn (160 per cent of GDP). Of this, 34 per cent went to financial institutions, 42.7 per cent went to households, secured on dwellings, and another 10.1 per cent went to real estate and construction. Manufacturing received 1.4 per cent of the total. UK banking is a highly interconnected machine whose principal activity is leveraging up existing property assets.”

My emphasis added. So there’s this enormous financial centre on the doorstep, but it isn’t serving what people would imagine is it’s primary purpose. What, then, is the point of all this finance?

Is there a revival in UK manufacturing? Well, if there is, it’s not a particularly big one. But there seem to be some promising signs. The UK manufacturing sector has certainly received a huge boost since the financial crisis, in the form of a massive exchange rate stimulus, with the Pound Sterling having fallen from around 1.50 per Euro to around 1.20 today.

And what brought about this decline in the exchange rate? A massive decline in the UK financial centre, amid the onset of financial crisis back in 2007 and 2008. When the financial sector suffers, the exchange rate falls, the brain drain lessens, and prospects for manufacturing improve.

A less ‘competitive’ financial centre may mean a more competitive country. David Ricardo would have understood.

A Finance Curse, anyone?

Related Posts

New research on key role major economies play in global tax avoidance

offshore-network_colorcorrectedAn important new study on Offshore Financial Centres (OFCs) from the University of Amsterdam has made some fascinating discoveries, challenging, as the Financial Secrecy Index has, the popular misconception that tax havens are only palm fringed little islands and exposing that in fact major economies play a key role in global tax avoidance. Specifically they’ve […]


Launch of international research collaboration, #AltAusterity

alt austerityToday is the launch of #AltAusterity, a new, international research collaboration of which Tax Justice Network is a partner.  The project aims to stimulate public debate on the subject of austerity though high quality research. It is a response to the lack of evidence which has underpinned the current policy agenda on austerity. The project […]


RB tax avoidance – company calls for public country by country reporting after Oxfam report reveals profit shifting

pictureOxfam has today released a report on tax dodging by RB, the company formerly known as Reckitt Benckiser and the maker of thousands of well known household products. The report looks at the 2012 restructuring of the company which saw it set up ‘hubs’ in the Netherlands, Dubai and Singapore, all well known corporate tax […]


Half measures mean Mauritius will continue to be a tax haven for the developing world

MauritiusThere was news this week that Mauritius has signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). This is an initiative from the OECD to allow countries to take measures designed to stop tax avoidance by multinational companies and put them into their existing network of […]


G20: Pressure rising on tax haven USA

HamburgWhilst the eyes of the world focused on the isolation of the US from the ‘G19’ position on climate change, something remarkable played out elsewhere in the process. Following closely the common EU position that we highlighted a few days ago, the G20 communique devotes important space to tax justice. It’s so good we quote […]


About The Author

Nicholas Shaxson is a journalist and writer on the staff of Tax Justice Network. He is author of the book Poisoned Wells about the oil industry in Africa, published in 2007, and the more recent Treasure Islands: Tax havens and the Men who Stole the World, published by Random House in January 2011. He lives in Berlin
View all posts by

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to Top