As the UK proceeds to finalise Brexit plans and a number of banks are said to be considering relocating operations to the continent, it may come as a surprise to learn that China is set to build a new financial district in London.
According to a Bloomberg report, four of the country’s biggest banks have this month agreed to finance the first stage of a $2 billion transformation of an old East End dock in London into a hub for Asian businesses.
Backtrack to when Canary Wharf was built some 30 years ago and and one is reminded how major projects in the UK’s capital can remain white elephants for years before becoming cash cows. This was evident when the development was taken over by creditors in 1992 after Paul Reichmann’s Olympic & York Developments couldn’t pay interest on its loans.
However, Chinese companies are on track to invest nearly $5 billion in London property this year, according to data compiled by CBRE Group. Though the UK’s vote to leave the European Union lowered prices for Chinese by depressing the pound against the yuan, any longer-term payoff depends partly on whether the Brexit will drive down rents and values by diminishing the city’s role as Europe’s finance hub.
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Positive Brexit Outcome
Michael Marx, former chief executive officer of developer U & I Group, commented: “Chinese investors are betting that the UK will do well in the Brexit talks, and if it doesn’t, companies will still choose London as their base. London didn’t become the financial capital of the world overnight and it certainly won’t lose that status so quickly.”
It has been estimated that as many as 100,000 jobs could move away from London within two years of the UK officially starting the process to leave the EU as businesses risk losing their passporting rights.
Attractive Financial Hub
Nevertheless, concerns that London will lose its status as Europe’s financial capital has not stopped ABP and Citic from securing more than $373 million to finance the first phase of the Royal Albert Dock project in which the Bank of China, Agricultural Bank of China, Industrial & Commercial Bank of China and China Construction Bank Corp. are lending to the development.
London is still seen as a big attraction for companies from Asia which already have trading agreements with the EU and can still trade irrespective of the trade deal that the UK eventually gets.