05 April 2004

REMARKS BY THE CHANCELLOR OF THE EXCHEQUER AT THE OPENING OF LEHMAN BROTHERS NEW EUROPEAN HEADQUARTERS CANARY WHARF, LONDON

Let me say first of all what a pleasure it is to be here at Lehman Brothers this morning in the heart of Canary Wharf, at the centre of London’s modern financial services economy, at this historic opening - the formal opening of Lehman’s new European headquarters, for which I congratulate architects, designers and developers.

And first, in thanking you for your invitation, let me at the outset pay tribute to all of you here – executives, employees, representatives of the financial sector, all 3,100 staff of Lehman’s here in Canary Wharf - for the contribution you and your company make to the prosperity of Britain, the enterprise you show and the difference you make.

For from its modest beginnings 154 years ago as just a general store, Lehman Brothers has expanded first into a trading company, then as a merchant bank and, starting here in London in 1972, as a global investment bank, that has during each phase of its 150 year history been a leading innovator – pioneering 100 years ago in financing the development of airlines, cars and film – and today leading in financing the growth industries of pharmaceuticals, the internet and nano-technology.

And let me say that having opened the Heron Quays project in July 2000 when this area was little more than a building site, it is a particular pleasure to be invited back four years on and to be able to see the spectacular development of this site and Canary Wharf – for which I praise the development team and the rising numbers of businesses making the wise decision to locate here and providing new testimony to the success of the Canary Wharf vision.

So today, just as this wonderful area of London was – with its port and trading facilities –at the heart of Britain’s industrial revolution and our imperial trade when ships left here to sail the world, so too again in a new world – with our financial expertise and our ability through modern communications to trade world wide from here - this site is again at the centre of one of Britain’s great global success stories: our financial services industry.

And in the presence of your local MP Jim Fitzpatrick I’d like on his behalf and mine to thank and congratulate Lehman’s for your contribution to the local community here in Tower Hamlets – including your generous announcement today of a $1 million dollar leadership grant to the charity ‘Shine’.

This is a great day not just for Lehman’s and Canary Wharf but for the City of London – evidence that as global economic change has opened up opportunities in the world economy for those prepared to seize them, the City of London is making the most of them: first, because it sees both globalisation and technological innovation as an opportunity not a threat and instead of simply protecting its share of a national market, it strives – with an even greater internationalism and global reach than ever before - for a greater share of the growing global market; second, because we have workforces that are adaptable, creative and enterprising – and who are transforming their skills for the new world.

Indeed, research shows that London’s strengths include:

a pool of skilled labour and a flexible labour market
competitive personal and corporate tax rates
the Financial Services Authority itself
the concentration of financial institutions and high volume of transactions which means business can be carried out at globally competitive rates with highly specialised markets and services given the freedom to develop
and with a significant proportion of euro business transacted in London – in fact more international financial services business in euros is done in London than in any city inside the euro area – the UK’s influence remains strong.

I am proud that London plays host to a greater number of foreign bank branches and subsidiaries than any other city in the world; has the largest share of global cross border bank lending; and with the London Stock Exchange, the largest trading centre for foreign equities and international bonds in the world, and the Foreign Exchange Market, the largest and most important in the world, you lead for Britain in the world – generating £50 billion of wealth each year, providing work for over one million people, and accounting for over five per cent of UK output.

And I can affirm to you that, in all the decisions we make, the Government will continue to do all in our power to ensure that London remains a pre-eminent financial centre.

I believe that as a result of tough long term decisions made in recent years starting with Bank of England independence, the radical reduction of debt, tough new fiscal rules, our welfare to work programme and our new competition policy, Britain is ready – even when faced with greater, tougher and fiercer competition not just from Europe and America but from Asia and from rising China and India – to play an even bigger role in the growing global economy as it grows out of the downturn and as it restructures to meet global competition.

And let me say I believe we can build in the coming years on Britain’s assets and advantages:

a global reach wider than almost every other industrial country;
a historical record of creativity, invention and scientific achievement longer than any other country;
a foundation of political and now economic stability that goes deeper than any other country.

But we know we will only continue to succeed in the future if business and the British people can build on these strengths and if we the political decision-makers also take the hard decisions, making the tough long-term choices that are needed.

That’s why we will continue to look with you at the business tax regime so that we provide incentives for investment in wealth creation and greater rewards for success.

We will continue to make the wider reforms that are necessary to create a more competitive environment – reforms in planning, transport and housing.

And we will continue to invest in education and training so that you have the skilled workforce you need for the future.

And at the same time, we will continue to fight for British interests in Europe - and I know that after his time as a very successful EU Commissioner in the late 1970s your European Chairman – Lord Tugendhat – takes a keen interest in all matters European.

Having won the battle for a Savings Directive against tax harmonisation, agreed a deregulation initiative launched with four European Presidencies and brought the Committee of European Banking Supervisors to London, we have also insisted on changes to:

the Prospectus Directive – making it easier for corporates to issue shares or bonds across the EU on the basis of a single prospectus whilst protecting the position of the international Eurobond markets in the UK
the Transparency Directive – resisting the introduction of mandatory quarterly reporting that would have put unnecessary regulatory costs on business
the Market Abuse Directive – ensuring that it exports key aspects of the successful UK regime to the rest of Europe
the Occupational Pensions Directive – making it easier to manage pension schemes across borders in Europe, whilst avoiding new detailed rules about the types of financial assets that British pension funds can hold
and the Investment Services Directive - where I can tell you today that the UK has been able to secure amendments that decrease significantly the impact of the “pre trade transparency rule” for share dealing by investment firms - reducing by three quarters the total value of transactions in London covered by this rule and ensuring that wholesale market business can continue uninterrupted…whilst making it easier for investment firms and stock exchanges to do cross border business and exploit the single market.

And whether it be opposing tax harmonisation or opposing a federal fiscal policy, I can assure you that those of us who are pro-Europe and believe in Europe will make the case for a Europe that recognises that it is no longer a trade bloc isolated from the rest of the world but a Europe that must be outward looking not inward looking, open not inflexible, and must radically reform to meet the global competitive challenge.

And I know that here from London we can play a part in both a Britain and Europe making the most of the global economic opportunities because this is a London which - while proud of a financial history as a world leading player stretching back to the 17th century - has its thoughts firmly fixed not on the past but on the future.

Lehman Brothers is a great company today that can both look backwards with pride and look forwards with hope.

And in wishing Lehman Brothers the success it deserves for its future let me thank you for the privilege of being here and formally declare this new building open.