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UK's capital to become world's capital of commerce

A study by IBM reveals the city of London will become a magnet for talent from the US and Eastern Europe as it cements its reputation as the cosmopolitan capital of commerce.

The trend will emerge by 2015 as restrictive regulations in the US drive companies and executives to London, while the UK's hedge funds draw skilled mathematicians and actuaries from Eastern Europe.

The size of the highly skilled immigrant workforce will result in fewer bonuses for bankers and pressure for deregulation will be placed upon Europe's financial centres, the IBM report for Business Value and The Economist Intelligence Unit says.

The report also says that there will be a transfer of labour, as low cost work will be sent to Eastern Europe. They will be responsible for back office work, and the generated profits from outsourcing will be reinvested back in the UK. Western Europe will then benefit from an influx of hard working and highly skilled employees with specialist financial and actuarial skills.

This will become the central motor that will drive the London financial sector into the future says the report.

Skilled immigration is predicted to increase rapidly for these specifically skilled positions in the next few years.

More executives will leave the US to escape finacial disclosure rules and other restrictive regulations in the US that take up 20% to 30% of financial markets managers' time. This will lead to a US invasion of London.

As a result there will be greater competition for jobs. "Star traders" will continue to get their big annual bonuses, but these will be offered on merit to only the best performers, the IBM report stated.

An unnamed chief strategist said, "America is taking over London. Generally speaking, the London economy will benefit because there will be increased competition."

Sarbanes-Oxley, US financial disclosure rules, has often been cited as a deterrent for companies looking to invest in the US.

Kazakhmys, the FTSE 100 copper miner, has chosen London for its recent listing to avoid the burden of US regulatory compliance and several UK companies have removed their secondary US listing for the same reason.