It’s known as the “Little Red Dot” in a sea of gigantic countries. But Singapore suddenly has a shot at becoming the world’s leading financial centre – as Brexit threatens to deprive London of the mantle.
A slew of recent reports points to Singapore’s rise as a potential leader-in-waiting. The south-east Asian city-state placed third in the Global Financial Centres Index, after London and New York; and PwC ranked Singapore second after London as the world’s best business hub. Meanwhile, the World Economic Forum tapped Singapore as the world’s second most competitive country, after Switzerland.
While the PwC study looks at cities as overall business centres – not just financial hubs – Singapore came first in three categories that are critical to success in global banking: technological readiness; infrastructure and transportation; and ease of doing business.
Momentum is also clearly on Singapore’s side. It has catapulted from 7th to 2nd place since the equivalent PwC report in 2012. But opportunity won’t come from grabbing business from a Brexit-diminished City of London. London does most of its business with Europe. If it loses “passporting” privileges – the automatic right to sell services across the European Union – that business will go to Europe and be dispersed across cities such as Frankfurt and Paris. For Singapore the key word is “dispersed”: no European capital is credible as the next London, giving Singapore an opening to rise higher as a global force.
Singapore’s moment, then, comes not from benefiting from another’s weaknesses but from new opportunities to build on strengths. Here the keys are geography and openness. Singapore is the top banker for Asia, the region with the biggest chunk of global GDP. That share was nearly 40 per cent in 2014, according to Deloitte – it’s projected to grow to 45 per cent by 2025.
As global wealth migrates eastward, Singapore is cashing in. Boston Consulting Group predicts that Singapore will overtake the UK as the world’s second largest offshore financial centre by 2020.
Most importantly, Singapore is the only financial centre in the world that today fully embraces the vision that made the City of London great: radical deregulation; low corporate taxation; openness to the world. Singapore’s embrace of English as its business language is crucial to its success.
Not least, Singapore – like London – has a passion for finding creative ways to make itself a dynamic and enjoyable place to live. Bankers work hard. Friday night in Frankfurt is not the best incentive to stick with a brutal workload.
Along with these attractions, Singapore has unique advantages of its own. It is a model of governmental and regulatory stability – something which is today in short supply in the West. And its overall infrastructure is also world-beating – as anybody flying from drab Heathrow to cutting-edge Changi Airport will immediately notice.
Singapore undoubtedly faces significant challenges. It has a big Asian financial rival in Hong Kong and both are linked to China’s currently slowing economy. Like other financial centres, Singapore banks are also enacting layoffs amid global turbulence, and increasing automation (a so-called “Uber” moment) in the financial industry.
But Singapore is more diversified than Hong Kong; and China in any case is going to remain a gigantic economic engine for the foreseeable future. Singapore will maintain the upper hand if it maintains its current trajectory of being an open, innovative and aspirational economy. And as the world leader in technological readiness, Singapore may stand better placed than other centres to weather the disruptive forces of banking industry automation.
On the financial market charts, expect the Red Dot to continue climbing higher.