December 15, 2008

Echoing warnings from some bankers, London's mayor's office said the City faces serious threats to its status as a financial center.In a rare official admission, a report commissioned by Mayor Boris Johnson concluded that London position is under threat as it loses business to "competitor cities that have developed aggressive strategies to steal business away."

The report includes suggestions to fight back, such as an overhaul of the U.K.'s insolvency laws which have seen companies with assets tied to Lehman Brothers' bankruptcy struggling to get them back. It makes a plea to the U.K. Treasury to reduce corporate tax and to make tax policy more consistent.

The gloomy conclusions come from a report prepared by a group of finance industry executives. Lower taxes and more "favorable" regulation has led to cities like Dublin and Luxembourg attracting more than £420 billion ($630 billion) of investment funds away from London over an unspecified period of time, the report says. In insurance, the zero percent corporation tax of Bermuda has seen London lose 700 jobs to the island since 2000 with a resulting loss of £450 million in taxes to the Treasury, the report says.