The importance of geography – London as a centre for family office investment

Insight

24.04.2024

We are very pleased to be sponsoring this year’s Private Capital Symposium hosted by the Institute of Entrepreneurship and Private Capital of the London Business School. A link to the event can be found here. Our panel discussion will focus on “The importance of geography and London as a centre for family office investment”. As we reflect on factors affecting the deployment of private capital and deal activity following global lockdown, we look at the importance of both local and global connectivity for investors, general partners/fund managers, debt providers and professional advisers. Specifically, we focus on how that is channelled through London alongside other financial centres. Taking London as the example, the factors that we have identified (among others) as critical to the success of a financial centre and the challenges to those are as follows:

Opportunities

Geographical location: Alongside simple factors such as the benefit of London’s time zone, London is being used by global, and globally mobile, investors to access both UK, European and other regional markets. This is supported by research by Deloitte which has named London as the leading European city for hotel investment for this year[1].
Historical connections: The current Lord Mayor of London, Michael Mainelli, has described London as “the world’s coffee house”[2] and London is promoted as one of the world’s central commercial centres. Institutions established over centuries still provide critical infrastructure and support for investment across asset classes and globally.
Access to a professional services hub and the English law and legal system: Access to high quality advice on both the private and corporate sides of a family office and the growing connections between privately held capital and corporate investment has come from the combination, and location, of financial and professional services alongside a consistent legal and regulatory environment[3].
Education: The reputation of UK schools and universities has meant that the UK has developed strong pull factors from an early stage in individuals’ careers. The development of highly regarded research capabilities across (among others) technology, medicine and engineering has drawn together a concentration of “intellectual capital” that has diversified across a number of industries which in turn has created demand for investment[4].

Challenges

The current economic performance of the UK and wider Europe: The response from (and friction between) monetary and fiscal policy makers has created an uncertain deal environment[5].
Public market performance and the value differential between UK and US stocks and outflows from public company ownership: However, there are signs of a (relative) resurgence as the FTSE 100 has hit its highest level since February 2023[6].
The global and domestic political backdrop: Which in turn informs the confidence of investors with other financial centres competing for access to investors and capital.
Corporate and personal tax changes: These have been announced this year, with the highest profile change being to the taxation of “res non-doms” (non-domiciled individuals living in the UK) and the potential impact on where globally based institutions and firms will choose to base themselves over the long term[7].

We look forward to discussing these aspects on 21 May with our panel of experts. In the meantime, please do see our own experts' views on the factors that are likely to affect the wider private capital market this year Private capital insights for 2024 (farrer.co.uk).

[1] London becomes the most attractive European city for hotel investment in 2024 | Deloitte UK

[2] Editor's podcast: Why the Lord Mayor views London as the world's coffee house - FTAdviser

[3] Key facts about UK-based financial and related professional services 2024 | TheCityUK

[4] London calling? Higher education, geographical mobility (publishing.service.gov.uk)

[5] Global economic outlook: how hard will we land? | Institute for Fiscal Studies (ifs.org.uk)

[6] FTSE 100 FTSE overview | London Stock Exchange

[7] Reform to non-dom rules: Labour party announcements (farrer.co.uk)

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.