With the UK on the brink of finally exiting the EU at the end of this week, only a third of financial professionals view the city as the world’s number one financial hub.
According to the latest Global Regulatory Outlook (GRO) report released by Duff & Phelps which surveyed senior financial sector professionals from around the world, only 33 per cent currently see London as the world’s foremost financial hub, down 20 per cent over the last two years.
New York, which also topped last year’s standings, picked up momentum this year on the other hand, with more than half of respondents (56 per cent) regarding it as the world’s most important financial centre, a 33 per cent increase over the last two years.
“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 and global leader of compliance and regulatory consulting at US-based advisor firm Duff & Phelps.
“While London was still considered the pre-eminent financial hub in 2018, it could be that the shockwaves of the ongoing EU negotiations have started to show. If this is the primary reason for London’s changing fortunes, then the resolution of the UK’s departure could see it bouncing back,” she continued.
It does seem like the GRO survey shows a significant lack of optimism, even with trade talks between the EU and UK having started, however. Only 22 per cent of professionals predict London will still be the major financial centre in five years’ time. No other European city looks set to overtake it anytime soon though, in the view of the survey’s participants.
The outlook for European financial hubs such as Paris or Frankfurt do not come close to replacing New York or London with only 1 per cent and 2 per cent of respondents, respectively. Instead, it is emerging Asian centres like Hong Kong (4 per cent), Singapore (5 per cent) and, particularly, Shanghai (9 per cent) that are expected to see the biggest growth on the global scene.
“While the City of London has been resilient, it has not proved completely immune to the effects of Brexit and corporate deal making has been stymied by the uncertainty of our relationship with our biggest trading partner, the EU,” said Tim Wainwright, partner at Eight Advisory.
“In contrast, New York has benefited from a booming US economy and the Trump administration, which acts very favourably towards corporates and financial institutions. With more certainty in place over Brexit we are already seeing an uptick in activity in the City, and we are confident that we will see London regain its position as the world number one financial hub,” added Wainwright.
There is one area where London has a clear advantage – regulation. Senior executives rate the UK as having the most favourable regulatory regime for financial services in the world (30 per cent), closely followed by the US (26 per cent). Singapore is considered third with 18 per cent of votes.
“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,” commented Melis.
