- Future of London based hedge funds to be debated in Brussels - fears Chancellor of the Exchequer will not "defend City of London"
City News Desk
The City of London's position as the leading global financial centre, will today come under renewed pressure when the Finance Ministers of the 27 member states of the European Union meet to discuss "sending to the European Parliament the Alternative Investment Fund Managers (AIFM) Directive, along with conclusions regarding the 2011 budget."
The proposed directive in simple terms if implemented in its current form will mean hedge funds in London, who currently account for 80% of the entire European Union hedge funds industry, will relocate outside of the EU and divert funds to countries outside of the EU. In its current form, the AIFM directive, would cause London private equity firms to change their business models. This would incur serious costs and cause funds to stop investing in SMEs and start-ups, which raise much needed capital from "alternative investment funds" in a time when banks are not lending money. This will drive innovators out of London and out of the EU.
Leading the campaign to defend the City of London is the Conservative MEP for London Syed Kamall who said last night:
"It is wrong to punish firms that benefit from the investments made by hedge funds and private equity, simply because politicians are looking for a convenient scapegoat for their own regulatory mismanagement of the banking system."
The FT today reported that a "compromise deal" was likely to happen which would reduce opposition from Britain, with a deal on how "alternative funds" moved around the EU with the introduction of a passport "allowing approved funds to market across the bloc rather than be subject to country-by-country rules".
Alistair Darling is also facing renewed criticism that there have not been sufficient efforts to cut the UK's budget deficit, legitimising the Conservatives strategy of immediate plans to address the deficit faced by the British economy with David Cameron the leader of the Conservative in an interview with the BBC saying:
"We've got to be straight with people about what needs to be done... we have always said more than the government and we will go on saying more."
Alistair Darling the Chancellor once again said that there would "be no new spending cuts announced in the Budget, with the focus instead placed on measures to boost economic growth and job creation."
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