New York surges ahead of London as world’s top finance hub as Brexit undermines confidence

Ben Chapman
Financial services is among the sectors showing 'worrying weakness' as growth in the services industry stalls, economists have said: AFP

New York has surged further ahead of London as the world’s top financial centre and Asian hubs like Hong Kong and Singapore are gaining ground as Brexit uncertainty undermines confidence in the capital, a survey has found.

Only a third of senior bankers and asset managers now see London as the most important city for financial services, a precipitous decline of more than 20 percentage points in the last two years.

While the City’s star has fallen, Wall Street has taken advantage, with 56 per cent of respondents now regarding New York as the top finance hub – up from 33 per cent since 2018.

As Britain prepares to leave the EU this week, the poll of 245 financial services figures by consultants Duff & Phelps points to a challenging future for the City.

Just 22 per per cent predict that London will still be the world’s pre-eminent financial centre in five years time, though few respondents believe European rivals such as Paris, Frankfurt, Amsterdam or Dublin will take the top spot.

London-based banks have moved subsidiaries and staff to mainland Europe in preparation for Brexit, but maintain a large presence in the UK.

“It is difficult to avoid the suspicion that three years of uncertainty since the Brexit vote has contributed to London’s fall,” said Monique Melis, managing director at Duff & Phelps.

One area where London remains on top, according to the survey, is for having the most favourable regulatory regime. Ms Melis suggested that deregulation after Brexit could help persuade financial services businesses to remain in the UK.

“If the government can position the UK as having a more favourable regulatory environment and separate it from the red tape of European regulation, then we may see the UK win back its crown and attract new talent to the sector,” Melis said.

Adopting a light-touch approach to regulation after Brexit – dubbed the “Singapore-on-Thames” model by some critics – would likely prove controversial.

Stephen Jones, chief executive of UK Finance, said: “The results underline the importance of our appreciating the need to maintain our competitiveness in a challenging business and political environment.

“That is why we need world-leading regulation and a tax system that makes us attractive for international investment, while ensuring we are the safest and most transparent place for banking and other financial service providers to do business.”

Miles Celic, chief executive of industry lobby group, The City UK said the poll showed Britain cannot afford to be complacent with other financial centres looking to take business from London.

“The uncertainty which has surrounded Brexit is likely to be a factor in the outcome of this survey.

“Ultimately these rankings are all about perception. The world is watching to see if the UK and the EU can overcome the political hurdles around Brexit and secure a deal that makes economic sense.

“With European economies facing significant economic headwinds, it is vital that policymakers keep a sharp weather eye on wider European competitiveness, and seek to maintain open and unfettered access to global capital markets through Europe’s primary international financial centre in the UK.”

Separate research conducted by Z/Yen found that New York overtook London as the world’s top banking hub in September 2018 and extended its lead last year.

Despite the increasingly bleak sentiment about London’s future, its financial sector is still expanding at a healthy clip, at least on some measures.

The UK’s net exports of financial and related professional services grew by around 5 per cent to an estimated £82.8bn in 2018, up from £79bn in 2017.

In currency markets, London has consolidated its dominant position, accounting for 43 per cent of global foreign exchange revenues last year.

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