Toronto is a serious contender as cities vie to replace London as a global financial hub

MONEY IS A SKITTISH SORT OF THING. For all the elaborate stone structures built to contain it, for all the clever, pin-striped advisers and regulators who prudently plan its future, money always has its bag packed and one foot out the door. At the first whiff of uncertainty, it bolts.

It comes as no surprise, then, that a vote in favour of “Brexit”— and the United Kingdom’s messy departure from the European Union—has made money especially jumpy, compromising London’s long-standing role as a global financial centre.

The Bank of England has asked U.K. banks, insurers and other financial institutions to draw up comprehensive strategies for dealing with Brexit, and it will scrutinize them closely. But as it was with the handover of Hong Kong to China in 1997, no amount of public reassurance or display of contingency planning is capable of forestalling the inevitable.

As a result, pundits have been predicting which European city will provide the requisite reassurance that attracts money, and, however briefly, holds it. Will it be Paris, Amsterdam, Frankfurt or Luxembourg?

Canadian banks—all of them have significant presence in London—are already softly repositioning themselves for change. The level of engagement ranges from a staff of 20 for National Bank to more than 5,000 for RBC. TD Bank recently announced plans to expand its presence in Dublin, while RBC has already trimmed back its investment banking ranks ostensibly to reflect diminished deal flow. They’ve all admitted at various times that they have a close eye on their operations there.

WHEN MONEY IS ON THE MOVE, IT CREATES NEW OPPORTUNITIES.

In the face of such upheaval, there is only one certainty: When money is on the move, it creates new opportunities. Among the international cities well-positioned to benefit from a shift away from London is Toronto.

Think about it. The world’s largest banks already have footholds in Toronto. The city’s financial sector has a deep bench of educated workers with expertise in both traditional banking and fintech. The Toronto Stock Exchange is already the eighth largest in the world, with market capitalization of around $2.5 trillion—significantly larger than Frankfurt’s DAX.

The city is consistently ranked one of the top places in which to live. In August, The Economist magazine’s annual survey cities placed Toronto fourth of 140 international cities reviewed. Toronto boasts good schools, cultural activities galore, top sports teams and urban infrastructure. It even has an easily accessible downtown airport that provides connection to New York City and Washington, D.C.

Although English is the dominant language—considered a plus in financial markets—Toronto is exceptionally multicultural. This is a draw for firms that must relocate top talent and for understanding the subtle nuance of dealing with other international markets.

Furthermore, Canada is a leader in the standards for and enforcement of financial regulations, something for which it received accolades during the 2008 global financial crisis. Our legal system is based on British jurisprudence. The political system is stable and transparent. We stand for law, order and good government.

It’s true that London has been a point of commercial intersection since Roman times, but Toronto is also exceptionally well-placed to attract nervous money and talent from another financial hub under siege—New York.

U.S. President Donald Trump is openly preparing to put his political imprint on management of the U.S. Federal Reserve (Janet Yellin’s term as chair of the board of governors expires in February 2017) and a Republican-controlled Congress has begun the push for greater deregulation and an easing of capital requirements for big banks, just a decade after the last global financial crisis.

That’s not the only concern of nervous money: Much of the post-election stock market surge in the U.S. was predicated on Trump pushing through tax reform and infrastructure spending, both of which look increasingly unlikely. Even the prospect of political failure is likely to send money scuttling for cover at the same time as the impact of Brexit becomes clearer.

In fact, it’s a safe bet it’s already called a cab to the airport.

Canada’s soft power is peaking in an age of hard choices

“PEACE, ORDER & GOOD GOVERNMENT.” 

These are the words that frame Canada’s Constitution. They are also the very essence of the Canadian “brand.”

Canada’s brand has been in the spotlight throughout 2017 as the country celebrates its 150th year. Many characteristics of Canada that have historically been regarded as domestic challenges have been recast as aspirational virtues—especially by outsiders.

These include Canada’s commitment to collaboration and consultation, respect for cultural and linguistic diversity, reliance on trade relationships, history as effective peacekeepers, and, more recently, reputation as prudent regulators of financial services.

None of these qualities may be individually compelling, but in a world full of turbulence and uncertainty, their combined effect is powerful.

This matters because brand generates the cachet that allows a country, company or individual to fully leverage political, economic or personal capital. Specifically, a reputation for stability and inclusion enhances Canada’s “soft power” and its ability to punch above its weight internationally. It provides leverage during multilateral trade negotiations and helps attract and retain talent—something that matters more than ever when global companies are looking for new places to invest or transfer their human resources.

It helps that our brand is consistent. Prime Minister Justin Trudeau, a young, compassionate, media-savvy leader, is seen as personifying Canadian values. That perception is reinforced when he is placed in stark contrast to U.S. President Donald Trump.

Clear differentiation in a crowded and competitive global market is precisely what branding is all about.

Canada has gained recognition in areas beyond economics and business. It is widely seen as a champion of human rights, just when those rights are being challenged in many other places. LGBTQ Canadians have been able to marry for almost 15 years. Canada is also acknowledged for its immigrant and refugee policies, including the recent welcoming of Syrian refugees. Canada’s tolerance for other cultures, religions and languages is deeply engrained, if occasionally imperfect.

However, there are internal issues that could jeopardize Canada’s brand over the long term.

Although the collapse of world energy prices has muted the international uproar for now, opponents of oil sands and pipeline development have attacked Canada’s reputation for environmental stewardship. When the energy sector rebounds and energy mega-projects fire up again, environmentalists will be poised to resume their attacks on Canada’s brand.

While Canada’s record for embracing immigrants may be positive when measured against many other countries, its relationship with its First Nations communities—despite the lip service paid to improvements—is a significant blot on the country’s human rights record.

Jurisdictional quarrels between the federal government and the provinces, and stubborn interprovincial barriers also mar Canada’s brand.

Also, a brand shines when things are going well, as they are in Canada right now. However, if something were to jar the economy—a breakdown in free trade with the U.S. that triggers a recession, for example—Canadians’ good will toward newcomers and toward each other could also become more tenuous.

These days, as Great Britain and the United States focus more inward and seem more divided than ever, we have cause to be grateful that Canada’s brand is shining. Will the things that unite us at this moment in history continue to do so in the future? We can hope that’s the case. But we should remember that it is far from a given.

---

From Wood & Water to Bits & Bytes

Canada is better known for its natural beauty and natural resource exports than for its innovative technology.

To be fair, the (mis)fortunes of companies like BlackBerry and Nortel have dulled any lustre on our brand in that sector.

Never mind. Joseph Lavoie, head of Navigator’s digital practice, Pinpoint, has identified some up-and-coming companies.

FARHAAN LADHANI  |  Founder at Better Place (formerly Udara)
This company aims to use our free time to change the world. Its app transforms virtuous real-world acts, such as feeding the hungry, fighting for human rights, and helping prevent suicide, into a game. Still in alpha mode, it’s already getting traction with progressive causes in the United States, and with human rights efforts in places like Syria. Better Place is reinforcing Canada’s international brand as an engaged global citizen.

---

TOBIAS LÜTKE  |  Founder & CEO at Shopify
A darling of Canada’s burgeoning tech scene, Shopify empowers retail businesses of all sizes. It connects entrepreneurs to their customers with back-office and front-office technology that was once only accessible to large enterprise companies. Shopify’s technology breaks down traditional barriers, allowing small companies better access to global markets. A very Canadian way to do business.

---

STEWART BUTTERFIELD  |  Co-founder at Slack
Companies of all sizes are discovering the power of this enterprise-grade instant messenger that gives people a way to better manage their email traffic. Used by the likes of Airbnb to scale global growth, Slack is reducing dependence on traditional email and allowing employees to collaborate and consult across continents and cubicles in new ways.

---

STEPHEN LAKE, MATTHEW BAILEY & AARON GRANT  |  Co-founders at Thalmic Labs
This Kitchener-based company is hoping to change the way we interact with computers by inventing wearable technology that connects the real-world to the digital world. Its first armband gives amputees the power to control a prosthetic hand, lets DJs control the lights and stage effects of their shows, and is being used by researchers to translate American Sign Language.