Singapore provides unlikely UK model
Pro-Brexit politicians claim the UK could emulate Singapore to become a low-tax economy with little state interference.
In per-capita income, Singapore passed the UK in 2006, and the income gap has since grown by almost US$3,000 each year since then. Consumer-spending power is generally higher in Singapore, assuming residents do not try to buy a heavily taxed car.
Singapore came fifth on the World Bank’s affluence list, which includes special administrative regions of China rather than just countries, on a purchasing-power-parity basis in 2015. The US was 11th at US$57,540 a year and the UK 26th at US$40,900, below the eurozone.
The anti-EU lobby hopes leaving the bloc will allow the UK to cut taxes and reduce regulations, positioning itself as a European free-market oasis.
But Britain already has a lower tax burden and a less regulated labour market than most other EU countries, and London has been playing a role in Europe similar to that of Singapore with its neighbours for decades. Global corporations, especially in the finance centre, have chosen Singapore and London as their bases where the language is familiar and the rules more relaxed than in other countries in their regions. Brexit, by restricting access to European markets, is poised to remove London’s status as a financial hub, rather than enhance it.
Another aspect of London’s economy that could be hammered by Brexit is the developing fintech, or financial technology, sector.
Fintech uses technology and innovation with available resources in order to compete in the marketplace with traditional financial institutions.
London and Singapore continue to be the main fintech centres although new centres are being established elsewhere, according to a report by Deloitte for the Global Fintech Hubs Federation, an initiative by Swift’s innovation arm Innotribe and the UK’s Innovate Finance.
The report covers 44 hubs and provides an overview of the how fintech hubs are emerging.
London and Singapore come out on top, followed by New York and Silicon Valley, with Chicago, one of the 24 new hubs, making a strong debut at five.
Mark Boleat of the City of London Corporation said: “The UK has long been a leader when it comes to fintech and so it’s great to see our position is unchanged. It does, however, highlight the prominence of other cities vying for a slice of the pie.
“With competition rising, it’s important for the UK to continue championing innovation whilst maintaining the right degree of regulation to see our fintechs thrive. We are committed to strengthening fintech in the UK and are hopeful we can continue to lead in this sector.”
The report pointed to a lack of regulation of the sector and the need for effective watchdogs to be established.
London’s Guildhall in the financial hub. Picture credit: Wikimedia