London has long been considered one of the world’s leading financial centres, with a history of over 200 years in the business. However, recent research conducted by the City of London has indicated that London has lost its position as the world’s top global financial centre. The benchmarking data compiled by the City’s governing body indicates that London and New York have tied for the top spot, marking the first year that the UK capital has not been the clear leader.
The loss of London’s sole lead has raised concerns about the competitiveness of the Square Mile. The report found that other financial centres around the world have grown faster, and many financial services executives have cautioned that the UK is at risk of losing its place as a top financial centre following Brexit. Companies have moved their operations to the EU, while others, such as Cambridge-based Arm and CRH, the world’s largest building materials group, have said they will seek listings in New York.
According to the report, there are concerns about the US being perceived as a more appealing destination for listing and expanding businesses due to its potential for higher valuations and a more lenient business culture. This has led British ministers to outline a range of potential service reforms, including to the UK listings market, as well as attempts to deregulate key sectors such as banking and insurance to drive new business.
To address these concerns, the City of London Corporation has initiated its own proposals aimed at securing the international competitiveness of the UK’s financial and professional services sector for the next ten years. An alliance comprising industry leaders such as Lloyd’s, Schroders, JPMorgan, EY, and Barclays is actively formulating recommendations that are set to be released later in the year. The aim is to preserve London’s position as a preeminent global financial hub by ensuring that the regulatory environment and incentives are attractive to financial institutions, businesses, and investors alike. The proposed measures will also focus on strengthening the green finance sector and facilitating investments in high-growth industries to encourage businesses to remain and expand in the UK.
It has been suggested that the financial and professional services sector requires a long-term plan to stimulate growth and maintain competitiveness. The City of London Corporation, a local government body responsible for the financial and commercial heart of the UK, has been conducting assessments of the competitiveness of major financial centres for three years. According to the latest report, London received an overall competitiveness score of 60, indicating a modest increase from the previous year’s score of 59. However, New York also saw an increase in its score by two points, bringing it to an equal standing with London. This finding has prompted discussions on the measures that can be taken to strengthen London’s position in the global financial landscape, such as promoting innovation and investment in high-growth industries.
The survey’s results indicated that London, despite losing its top spot, continued to excel in various areas, including innovation, financial activity reach, resilience, business infrastructure, talent and skills, and regulation. Nevertheless, New York’s score surpassed London’s due to its impressive growth in areas like tech investment, deal-making, and sustainable finance issuance.
According to the report, the financial and professional services sector of the UK created a massive trade surplus of £64 billion in 2022, which is the highest among all countries. However, the report also brought to light the fact that despite some alterations to listing regulations, fewer foreign firms were opting to get listed in London.
The governing body of the City of London is urging ministers to take action by encouraging defined contribution funds to invest in high-growth industries. The hope is that such investments would incentivize companies to stay and scale in the UK. In addition, the City is seeking to bolster the green bond market, which has yet to catch up to the levels seen in countries such as the US, France, and Germany. By focusing on areas like sustainable finance, the City aims to attract more investors and help the UK remain competitive in the global financial landscape.
Overall, the findings of the report are likely to raise concerns about the future of London as a global financial centre. While the City remains competitive across several metrics, other centres are growing faster, and there are fears that London could lose its position as a leading financial hub. However, initiatives such as those being developed by the City of London Corporation, backed by major financial institutions, may help to ensure that London remains a key player in the global financial landscape for years to come.
