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15/01/25
Global Elections Of 2024: A Geopolitical Shift And Implications For IFCs
The global geopolitical landscape has undergone transformational shifts throughout 2024, and as we head into 2025, the impact of these changes is set to reverberate across economies and markets worldwide. These shifts present opportunities and challenges for small-state International Finance Centres (IFCs). IFCs, often misunderstood as mere conduits of capital, play a crucial role in facilitating cross-border investment. Adapting to geopolitical, economic, and regulatory developments will be vital to their success.
From the ongoing tensions between East and West, the rise of populism in Europe, and the sluggish growth in China to a resilient US economy, the outcomes of elections across significant economies will reshape the global financial landscape. Additionally, the implications of the Russia-Ukraine war, renewed conflicts in the Middle East, and the success or otherwise of the UK's post-election pro-growth strategy will all impact the flow of capital and investment. Against this backdrop, IFCs must navigate a shifting world with agility and foresight.
US Elections: Shaping Tax And Trade Policies
Donald Trump’s election as the 47th President of the United States will have profound implications for global capital markets and, by extension, for IFCs. The US remains a dominant player in the global economy, and any shifts in its fiscal or trade policies will be felt across international finance.
President Trump has been very clear on his policy aims: higher tariffs on imports designed to prefer ‘Made in America’, lower business taxes, a more assertive immigration stance, a lighter touch on regulation, and an America First foreign policy will all feature under a newly mandated and empowered ‘Trifecta’ administration.
One of the critical concerns for IFCs is the direction of US tax policy, particularly regarding corporate tax rates and international tax regimes. Any tightening of tax regulations—especially following global efforts through the OECD's Base Erosion and Profit Shifting (BEPS) framework—could significantly influence the strategies of multinational corporations that utilise IFCs to manage cross-border investments. Conversely, a move to lower taxes and increased inward investment could have an expansionary effect.
US-China trade tensions remain a critical issue. The continuation of tariffs on Chinese goods and the broader trend toward ‘de-risking’ supply chains from China are reshaping how companies structure their global operations. IFCs that specialise in cross-border investment will find themselves managing increased demand for capital realignment as businesses diversify their supply chains to mitigate risks from US-China decoupling. IFCs are well-positioned to act as facilitators in this reorganisation as neutral platforms for capital flows.
The US economy's resilience is another telling factor, even as interest rates remain high according to historical standards. The relative strength of the US market, particularly in sectors such as technology, healthcare, and energy, is driving capital flows into US-bound investments. IFCs closely aligned with US capital markets must adapt to this dynamic, ensuring they can efficiently channel this growing investment volume.
China's Economic Slowdown And Geopolitical Risks
Once a pillar of global economic growth, China is now facing significant challenges. 2024 has been a difficult year for the Chinese economy, marked by sluggish consumer demand, a deeply troubled real estate sector, and shrinking exports. This backdrop presents a complex picture for IFCs that have traditionally facilitated outbound investment from China and foreign direct investment into the country. The weakening economic environment could reduce the flow of capital into and out of China, requiring IFCs to reassess their exposure to Chinese markets.
Further complicating matters is the rising tension between China and Taiwan. As China continues to push its claims over Taiwan, geopolitical risks in the region have increased. The US and its allies have stepped up their support for Taiwan, raising the stakes for any potential conflict. Taiwan is critical for global supply chains, particularly in technology, due to its dominance in semiconductor production. IFCs that facilitate investment in Asia must navigate these risks carefully, ensuring that they offer secure and reliable platforms for investment even as political tensions rise.
Still, the US strategy to reduce reliance on Chinese supply chains is driving companies to restructure their global operations. IFCs are likely to see increased demand for services that support the reallocation of capital to alternative markets in Southeast Asia and India, as businesses look for ways to mitigate geopolitical risk.
The Russia-Ukraine War: Energy And Supply Chain Disruptions
The Russia-Ukraine war continues to shape global energy markets and disrupt supply chains. Since the conflict began, energy prices have remained volatile, particularly for natural gas and oil. Europe, which was heavily reliant on Russian energy, has had to quickly diversify its energy sources, turning to liquefied natural gas (LNG) from the US and other suppliers. This shift has driven up energy costs across the continent, leading to inflationary pressures and slowing economic growth in key industries.
For IFCs, these energy market disruptions present both risks and opportunities. European companies facing higher operational costs may need to restructure their financing and operations to weather the storm. IFCs' expertise in cross-border investment and restructuring will play a key role in helping these companies adapt. Furthermore, accelerated by the conflict, the global shift towards green energy offers IFCs opportunities to act as intermediaries for capital flowing into renewable energy projects and infrastructure development.
The war's broader impact on global trade flows also highlights the need for IFCs to support businesses in diversifying supply chains. As the war disrupts traditional trade routes, companies are increasingly looking for alternative markets and reliable financial platforms to maintain business continuity. IFCs that can provide secure environments for capital and support the realignment of global trade will see growing demand.
Middle East Conflicts: Energy Markets And Capital Flows
The renewed conflict in the Middle East further complicates the global geopolitical landscape. The Middle East remains a leading region for global oil production, and any disruption to the supply chain, mainly through critical chokepoints like the Strait of Hormuz, could drive energy prices higher and exacerbate inflationary pressures worldwide. Still, US shale oil production and a slowdown in China will act as brakes on any rise in oil prices.
For IFCs, the Middle East conflict could lead to increased capital flight from the region, as investors seek safer environments for their wealth. IFCs that provide secure and neutral platforms for investment could attract capital from Middle Eastern investors looking to hedge against instability. At the same time, IFCs that position themselves as hubs for alternative energy investment will be critical players in the global shift towards renewables, as countries seek to reduce their reliance on Middle Eastern oil and Gulf states plan for a future where renewables are central to their energy transition.
Europe: Far-right Movements And Macron's Gamble
In Europe, 2024 has been defined by the rise of far-right political movements across several major economies. In countries such as Germany, Italy, and the Netherlands, far-right parties have gained significant political ground, capitalising on concerns over immigration, economic stagnation, and dissatisfaction with what they see as the 'federal' tendencies of the EU. The rise of populism could lead to more protectionist policies, increased regulatory fragmentation, and greater political instability across Europe.
For IFCs, this represents both risk and opportunity. The rise of populism could complicate cross-border investment within the EU, leading to capital flight from Europe's wealthiest individuals and multinational corporations seeking more stable environments. IFCs that are perceived as safe havens, offering political and regulatory stability, are likely to benefit from this trend, attracting capital from those looking to hedge against political uncertainty.
In France, President Emmanuel Macron faces a tricky balancing act. His economic reforms, including changes to pensions and labour markets, have sparked protests and opposition from far-left and far-right factions. If Macron stabilises France and positions it as a pro-European, pro-business leader, France could attract more international investment. However, if Macron's gamble fails, France's political instability could have wider ramifications for the EU's cohesion and economic growth, creating more uncertainty for investors.
The UK Post-Election Environment: A New Pro-Growth Strategy
In the UK, the 2024 general election has resulted in a new government that, after just 100 days in office, had introduced a pro-growth, investment-led strategy. This strategy aims to streamline regulations, attract investment, and stimulate economic growth. The new government's policies could present significant opportunities for IFCs connected to the City of London and UK-dependent jurisdictions, such as the Channel Islands and British Overseas Territories.
The UK aims to bolster its status as a global financial hub post-Brexit by simplifying regulations. For IFCs, this pro-business environment could attract more significant capital flows, particularly in private equity, private credit, and alternative investments. The government's focus on green finance, technology, and infrastructure also aligns with the broader trends in global investment, providing IFCs with new areas of opportunity.
However, the post-Brexit landscape remains uncertain, particularly regarding the UK's relationship with the EU. IFCs will need to carefully navigate the regulatory and trade complexities that continue to arise as the UK and EU chart their separate paths in financial services.
The Expanding Role Of IFCs Amid Geopolitical Shifts
As the global economy faces these geopolitical challenges, IFCs will continue to play a vital role in facilitating cross-border investment. Often misunderstood as mere intermediaries, IFCs provide a stable regulatory environment that efficiently allocates capital across borders. The growth of private capital and, more recently, private credit markets, has revolutionised how funds are sourced and deployed through IFCs.
Blackstone, one of the world's largest private capital firms, estimates that the private credit market alone could grow to as much as $25 trillion. This growth is driven by increasing demand for capital in real estate, artificial intelligence infrastructure, and broader deal activity as elevated interest rates decline. IFCs are ideally positioned to facilitate the movement of capital into these sectors, providing the platforms through which private credit and investment are structured and deployed.
The role of IFCs in supporting private capital flows is crucial. By offering tax neutrality, regulatory efficiency, and access to skilled financial professionals, IFCs will remain central to global capital and debt markets as private credit continues its rapid expansion.
Navigating Uncertainty And Seizing Opportunities
As we move into 2025, the global political and economic landscape is undergoing significant change. For IFCs, the challenges posed by geopolitical tensions, trade disputes, and rising populism, present both risks and opportunities. Those IFCs that can anticipate these shifts, adapt their strategies, and position themselves as leading facilitators of cross-border capital flows will continue to thrive.
By providing stable regulatory environments and innovative solutions for managing global investment, IFCs remain vital to the world's financial system. As has often been noted in these columns, IFCs are not passive conduits of capital; they are dynamic participants that must continuously evolve. The future promises substantial growth and opportunity for those who navigate these complexities successfully.
Geoff Cook
Geoff Cook is an experienced Chair and non-executive director. He has led significant business enterprises for more than three decades and helped major international groups to grow and prosper. As a Chartered Director, Geoff has deep knowledge of corporate governance, global regulation, and risk management. He has authored numerous articles and papers on cross border investment and the role of International Finance Centres (IFCs) in the global financial system. Geoff is an Advisor and non-executive director to a select number of Family Office, Private Capital, and Advisory boards. He was appointed Chair of Mourant Regulatory Consulting in 2021 and Chair of Quilter Cheviot International in 2019 to lead and develop the firm's international strategy. Geoff is also Chair of Apex Financial Services (Jersey) Ltd, a leading fiduciary and is presently Chair of the Society of Trustee and Estate Practitioners (STEP) Global Public Policy Committee. He was formerly the CEO of Jersey Finance and Head of Wealth Management HSBC with extensive international cross border experience across various sectors.
