UK investment chief confident of City's future

London will remain a top financial centre in the hard times ahead because the city's underlying strengths will still be attractive, the head of the agency that promotes investment in Britain believes.

"I'm confident that... out of this turbulence and difficulty London will emerge stronger than ever," said Andrew Cahn.

"You always have, in times of trouble, a flight to safety and quality and that's what London offers," said the chief executive officer of UK Trade & Investment, the government agency that helps foreign investors set up in Britain and helps British companies expand abroad.

Britain saw spectacular growth in financial services since the 1980s Big Bang deregulation and the signs last year were that London's financial district, known as "the City," was catching up with New York as the world's top financial centre.

But the collapse of a growing number of banks around the world because of the credit crunch, including big names such as Lehman Brothers, is forecast to lead to thousands of job losses in London and has raised questions about whether the City can ever be the same again.

"One of the key issues is how do we make sure that London remains the leading global financial centre?" said Mr Cahn.

"I am confident we will do that."

He did not think the trend to increased regulation of financial services in the wake of the crisis would put investors off. "Investors will be pleased to have appropriate and effective regulation and as long as we get it right, and I'm sure we will, I think our regulatory framework will be a draw."

The British government is viewed to having responded proactively to the crisis. Last week it made available £50 billion of taxpayers' money for injection into the country's banks and has nationalised two banks.

Last year Britain topped the European league for inward investment and Mr Cahn said he thought the country would keep, and possibly increase, its "market share" of foreign direct investment (FDI) because it offered a safe investment location and would remain an open economy.

Last month the UN Conference on Trade and Development (UNCTAD) said Britain's FDI last year was up by 51 per cent to $224 billion, mainly due to a flurry of takeovers.

UNCTAD predicted global FDI flows will fall by 10 per cent this year as major companies scale back spending plans.

"Our present performance is excellent and our pipeline is pretty good. But there's a time lag in FDI decisions and I do expect there to be a decline," Mr Cahn said.

He said UKTI's overall strategy of promoting Britain as a base for companies remained valid, but there would have to be changes in the way the country promoted financial services.

"I don't think we can simply continue as if nothing had happened.. The financial world has been turned upside down," he said, adding that he wanted to work with the new minister for the City, Paul Myners, to decide how to promote London's financial industry.