One of the things that strikes you when wandering around London’s Docklands district is the sheer amount of advertising for financial technology companies.
That London has established this position should surprise no-one, its civic and national leaders have been aggressive in maintaining the city’s position as technology has swept through the banking sector.
One of the notable things when interviewing the Chief Executive of London and Partners, Gordon Innes, two years ago was how engaged both the city’s business and political leaders were in the development of the town’s technology sector and the financial industry was a natural focus.
An example Innes gave of that engagement was the co-operation between the offices of the Prime Minister and the London Mayor where staffers meet on a monthly basis to agree on business and technology policy, which is then put into action by Westminster and the UK Parliament.
Poaching the Aussies
The benefits of that co-ordination and focus are global, with the London fintech sector attracting startups from as far as Australia.
Australia’s experience, or lack of it, in the fintech sector is notable. As the story linked above mentions, the UK Trade and Investment agency actively scouts out promising businesses while the local state and Federal equivalents sit on the sidelines (disclaimer: I worked for the New South Wales government on its digital economy strategy).
For Australia, the late entry into fintech doesn’t bode well. The country’s financial sector is overwhelmingly weighted towards domestic property speculation – a structural weakness seen as a strength by most Australians – and the country’s high costs make it tough for startups.
Defining a competitive advantage
High costs in themselves aren’t a barrier to a city’s success – London, New York and San Francisco themselves would be among the highest cost places to do business on the planet.
To justify those costs a city needs a competitive advantage and there’s little to suggest Sydney or Melbourne have anything compelling as a financial centre beyond a bloated domestic banking industry fixated on residential property.
Two of the arguments used to support Australia’s claims are it is on the doorstep of Asia and it is in the same timezone as the growing East Asian powerhouses.
If timezones do matter in modern business, the sad truth for the Aussies is the powerhouses themselves – specifically Shanghai, Hong Kong and Singapore – are in roughly the same longitudes so any time differentials aren’t great.
Being on the doorstep of Asia is probably one of the greatest Australian myths of all – it’s actually quicker to fly from Beijing to London than it is to Sydney. London might be on the edge of Europe – one US entrepreneur once told me how they can get Spanish developers into the UK in an afternoon – and New York is the gateway to the United States however there’s little reason to go Down Under for any other reason than to visit Australia.
The power of history and focus
Comparing London to Sydney is useful though as it shows the power of history and trade routes. London became a global financial centre because it was the financial centre of a global empire just as New York is today and possibly Shanghai in the not too distant future.
For the Aussies, the trade routes aren’t so encouraging in indicating the country has a future as a financial sector. Even ignoring history, the commitments of governments and local corporations are at best half-hearted compared to their global competitors – as we see with London poaching Australian businesses.
One of the strengths in those global centres is a constant re-invention and the ability to adapt to changing circumstances – how China adapts to a rebalanced economy will define whether it remains a global economic power – and in the UK the government is looking at the next big things in biotech and the Internet of Things, two areas where it has strengths and can attract global investment and skills.
For countries and regions aspiring to be global players, they need not just to be playing to their own strengths but also to where the future lies and not be late entrants into the current investment fad.