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Why does Labour need to suck up to the City? Britain’s economy is stifled by too much finance | Nicholas Shaxson

Why does Labour need to suck up to the City? Britain’s economy is stifled by too much finance | Nicholas Shaxson

Why does Labour need to suck up to the City? Britain’s economy is stifled by too much finance | Nicholas Shaxson
Feb 27, 2024 1 min, 8 secs

John McDonnell, then shadow chancellor, tried a “tea offensive” in 2018 to listen to City leaders’ concerns, but, alongside Jeremy Corbyn’s promise to “take on the power of finance”, it got nowhere.

– but unpack it and a vast can of worms opens, as 58 leading international economists explained in a powerful letter in 2022, urging Rishi Sunak not to force a “competitiveness” mandate on to financial regulators.

Finance, predominantly located in London, competes against other parts of the UK economy: not least via a “brain drain”, sucking talent out of manufacturing and services into high-paying City firms.

Finance is also the handmaiden of rising monopolisation, whether it’s investment bankers pushing and facilitating mega-mergers and acquisitions; or banks throwing cheap capital at profitable monopolists while starving their smaller, weaker and riskier competitors.

Meanwhile, private-equity firms “ roll up” obscure economic niches, such as buying all three vet practices in a medium-sized town, then jacking up prices and cutting wages once pet owners and skilled staff have few other options.

It describes (and overstates) the gross benefits of the City to the UK – the banks’ tax payments and so on – but airbrushes out the costs and the hidden flows in the other direction, away from children’s care homes, from vet practices, or from homeowners, and into the pockets of financial investors based in rich parts of London, overseas and offshore.

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