News

DEGI chief reassures London over monetary union threat

News

Andrea Carpenter

07 December 1999

Hohmann votes for London as Europe’s financial capital

European Monetary Union poses no threat to London’s status as the financial capital of Europe according to Klaus Hohmann, chief executive of the German open-ended fund DEGI.

Speaking at the British Council for Offices conference in Bristol, Hohmann said that London stood to win whether or not the UK joined the Euro. ‘What are you guys afraid of? Frankfurt is a small city and compared to the resources available to the City of London Frankfurt will never be able to do the job,’ he told his audience of British surveyors.

And in the light of recent political developments, Hohmann felt that there may be positive advantages for London in not joining in. ‘The convergence criteria will be loosened,’ he forecast. ‘I’d say that there is a 55% to 60% chance that EMU will happen and the same chance that it will be a soft Euro that emerges. If that happens you’ll be better off outside.’

But even if a strong Euro emerged without Britain, Hohmann felt that there would always be a role for London as the offshore centre of Europe. While the European Central Bank would be able to impose minimum reserve requirements on banks operating within the Euro zone, banks based in London would be perfectly able to trade in Euro-denominated securities without having to comply with the requirements. This would give them a competitive advantage.

But this sanguine view was not shared by David Hutchings, head of European research at property consultant Healey & Baker, who warned that failure to join the Euro could have disastrous implications for property in the UK.

Hutchings pointed out that the UK currently attracts 27% of all foreign direct investment into the EU. If the UK is late in joining the Euro, Healey & Baker’s research predicts that this level would fall to 21%. And the decline would be even greater if the UK never joined.

‘The UK currently has low labour costs but high property costs. Outside the Euro property costs would have to fall to attract investment, and that poses a threat to the property investment market,’ Hutchings warned.

Hohmann votes for London as Europe’s financial capital European Monetary Union poses no threat to London’s status as the financial capital of Europe according to Klaus Hohmann, chief executive of the German open-ended fund DEGI. Speaking at the British Council for Offices conference in Bristol, Hohmann said that London stood to win whether or not the UK joined the Euro. ‘What are you guys afraid of? Frankfurt is a small city and compared to the resources available to the City of London Frankfurt will never be able to do the job,’ he told his audience of British surveyors. And in the light of recent political developments, Hohmann felt that there may be positive advantages for London in not joining in. ‘The convergence criteria will be loosened,’ he forecast. ‘I’d say that there is a 55% to 60% chance that EMU will happen and the same chance that it will be a soft Euro that emerges. If that happens you’ll be better off outside.’ But even if a strong Euro emerged without Britain, Hohmann felt that there would always be a role for London as the offshore centre of Europe. While the European Central Bank would be able to impose minimum reserve requirements on banks operating within the Euro zone, banks based in London would be perfectly able to trade in Euro-denominated securities without having to comply with the requirements. This would give them a competitive advantage. But this sanguine view was not shared by David Hutchings, head of European research at property consultant Healey & Baker, who warned that failure to join the Euro could have disastrous implications for property in the UK. Hutchings pointed out that the UK currently attracts 27% of all foreign direct investment into the EU. If the UK is late in joining the Euro, Healey & Baker’s research predicts that this level would fall to 21%. And the decline would be even greater if the UK never joined. ‘The UK currently has low labour costs but high property costs. Outside the Euro property costs would have to fall to attract investment, and that poses a threat to the property investment market,’ Hutchings warned.