Flags of Great Britain and Hong Kong behind pawns sitting in centre of a chessboard.

All change: Can Hong Kong remain a global financial centre? And what will the future hold for the UK?

With political upheaval having already occurred in Hong Kong and currently unfolding in the UK, this article explores the prospects and what the future might hold for expats.

Hong Kong is investing in its future

There has been concern that the recent wave of emigration will adversely affect Hong Kong’s competitiveness. Additionally, the continuing public health measures to combat the Covid pandemic is putting further pressures on Hong Kong’s consumption demand.

The good news is that this is all short term.

As one of the world’s most open economies, Hong Kong remains an attractive proposition to professionals, entrepreneurs, and investors. The secret is in working to keep things this way to ensure that both capital and talent will continue to come to HK.

While the downward pressures on the domestic economy are expected to bog down the economy for some time, when the borders are finally fully open again, the expectation is that the economy will immediately strengthen.

A strong geographical position, primed to improve

Sitting between the world and the rest of China, Hong Kong is in a great position to become an even greater business hub.

Being integral to China’s huge “Belt and Road” initiative is not to be overlooked.

This ambitious US$900 billion project is intended to “reinvigorate the seamless flow of capital, goods and services between Asia and the rest of the world”.

Plans include major infrastructure and transport improvements around Hong Kong. In summary, on completion the Belt and Road initiative is expected to:

  • Create new land and maritime links between China and surrounding regions
  • Connect 65 countries across Asia, Africa, and Europe
  • Link more than half the world’s population
  • Provide new and more efficient trade routes
  • Deliver an integrated multinational transport network
  • Cost approximately US$900 billion, to be allocated to current and future projects.

Then there’s the Greater Bay Area linking nine provincial cities in Guangdong area of Southern China, including Hong Kong as the area’s financial and legal hub connecting it to the rest of the world.

The Greater Bay Area is a key driver of China’s growth, amounting to 10% of the country’s GDP, a population of more than 70 million people, and an economy that is estimated to be US$1.7 trillion –  larger than many countries.

With successful schemes like Stock Connect and Bond Connect, linking the Greater Bay to Hong Kong’s financial markets, the authorities are rolling out key infrastructure projects, like fast speed railways and superhighways, which will physically connect the people in Hong Kong and the Great Bay cities together.

All the while Hong Kong acts as the super connector – connecting China with the rest of the world.

Fintech investment helps retain Hong Kong’s strength as a leading financial centre

As the leading financial centre in Asia, the current Fintech revolution is something that Hong Kong seems keen to capitalise on. In fact, in June 2021, the Hong Kong Monetary Authority (HKMA) launched “Fintech 2025” to help drive development in the sector.

In addition to this, there are also several HK government schemes specifically designed to support and fund Fintech firms.

All of this should result in continued growth and increased opportunities for expats, making it an especially exciting time for those working within the financial and tech sectors in Hong Kong.

What’s the outlook for the UK?

At the time of writing (21 July 2022), the question about who the next UK prime minister is down to two candidates – Rishi Sunak and Liz Truss.

The pair now face a summer of campaigning and hustings before a vote by the wider party membership. The ultimate winner is expected to be announced on 5 September.

What happens in the next few years very much depends on who gets the top job.

And if Labour leader, Sir Keir Starmer gets his way, we can’t yet rule out the possibility of a general election.

One thing we do know is that the UK has some work to do. So, Liz Truss will need to come good on her promise to “hit the ground running from day one”, if she’s elected as Tory leader.

Problems the next prime minister will need to address

High level of public spending due to support measures during the Covid pandemic have left the country with far higher debt levels. A government report, from March 2022, estimates that the cost of government measures “range from about £310 to £410 billion” – the equivalent of about £4,600 to £6,100 for every person living in the UK.

And that’s before you factor in the stresses of Brexit, that the majority – including politicians – are working hard to avoid mentioning.

Brexit is done but there are still unresolved issues

Six years after the 2016 referendum, Brexit is pretty much delivered but there are continuing unresolved issues, including:

  • Lack of agricultural labourers
  • Surging inflation
  • Additional and prohibitive costs on the British fishing industry
  • Shortage of airport workers
  • Lack of lorry drivers.

It is easy to see how two of these issues are helping to fuel the cost of living crisis. It is costing more for farmers to gather crops from their fields, and supply problems mean that supermarkets are having to pay more to keep their shelves stocked. And that’s before you consider the additional administrative burdens that have been placed on food sellers.

What about the property market?

No matter what evolves from the current political turmoil, the cost of living crisis, inflation, and the subsequent interest rate rises from the Bank of England are all likely to contribute to slow house price growth compared to 2021.

Read more: Hong Kong vs UK property prices: What will your money buy you?

This means that expats and foreign investors should be able to get a good return on property investments, or their homes, should people decide to relocate to the UK to live.

Get in touch

At BMP Wealth we specialise in building, managing, and preserving the wealth of Hong Kong’s international community. By creating a personalised, comprehensive financial plan, we can help you realise and achieve your greater goals in life.

Whether you reside in Hong Kong, or the UK there’s a lot in flux at the moment. If you would like to discuss your situation and seek professional advice about how relocating in either direction may affect your tax situation or earning power, get in touch. Email info@bmpwealth.com or call +852 3975 2878.

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