The One Per Cent don't like it up 'em

From City AM:

TAXES and fees are making London by far the most expensive location in the world to set up a financial firm, according to figures released this morning.

Looking at rents alone, Hong Kong tops the table of world cities for locating a company in the financial sector, Savills said, but including the impact of fees and taxes London pips it to the post. With non-rent costs included, it costs £159 per square foot to run a financial sector firm in London, the estate agent said, over £128 in Hong Kong, £105 in Tokyo and £103 in New York. By contrast, hedge funds and others would have to spend only £40 for a square foot in Sydney, £43 in Paris – and just £27 in Mumbai, the Savills figures showed.

“The cost of residential and commercial accommodation can have a significant impact on the bottom line,” said Savills research director Yolande Barnes.

Including the cost of housing employees as well as the business, Hong Kong leapfrogged London. But the UK capital was gaining on the Chinese special administrative region, Savills said, with office rents in London up 6.5 per cent during 2012, compared to a 3.7 per cent fall in that period in Hong Kong.

It's the same old, same old. For whatever reasons - history, agglomeration, very accommodating government - London happens to be the most place where "finance firms" can make the most money with the least effort, and to the extent that a firm and its employees can earn £x more by basing themselves in London, a large part of that £x (adjusted for risks etc) will be collected as higher rents.

So it's not so much that "the cost of residential and commercial accommodation [has] a significant impact on the bottom line" but the the "bottom line" is fairly fixed; the total earnings after taxes are whatever they are; and whatever is left goes to rent.