New York has overtaken London as the world's most attractive financial center, a survey said on Wednesday (Sep 12), as Britain's decision to leave the European Union prompts banks to shift jobs out of the city to preserve access to Europe's single market.
Brexit poses the biggest challenge to the City of London’s finance industry since the 2007-2009 financial crisis, since it might mean banks and insurers lose access to the EU, the world’s biggest trading bloc.
New York took first place, followed by London, Hong Kong, and Singapore in the Z/Yen global financial centers index, which ranks 100 financial centers on factors such as infrastructure and access to quality staff. London's ranking fell by eight points from six months ago, the biggest decline among the top contenders. The survey's authors said this reflected the uncertainty around Britain's EU departure on March 29 next year.
"We are getting closer and closer to exit day and we still don't know whether London will be able to trade with all the other European financial centers. The fear of losing business to other centers is driving the slight decline and people are concerned about London's competitiveness," Mark Yeandle, the co-creator of the index.
Since Britain voted in 2016 to leave the EU, some of the world’s most powerful finance companies in London have begun moving staff to the EU to preserve the existing cross-border flow of trading after 2019
Financial services firms, which account for about 12 per cent of Britain's economic output and pay more tax than any other industry, potentially have a lot to lose from the end of unfettered access to the EU. Around 5,000 roles are expected to be shifted from London or created in the EU due to Brexit by March, a Reuters study published earlier this year found.
The head of the City of London predicted in July that 3,500 to 12,000 financial jobs would go because of Brexit in the short-term and more might disappear later. Asian competitors are closing in, with Hong Kong only three points behind London, the survey found.
Many London executives have warned that the biggest threats to London are not from other European centres but from global competitors such as New York and Hong Kong. The rankings, which are based on nearly 2,500 respondents working in the industry, provide a twice-yearly guide to the relative performance of financial centres globally.
The number of banks saying they plan to set up new EU subsidiaries after Brexit has picked up in the past year. Most major US, British and Japanese banks said they would build up operations in Frankfurt, Paris or Dublin.
Other European centres moved up in the global rankings. Zurich rose to ninth place from 16th six months ago and Frankfurt to 10th from 20th, while Amsterdam climbed to 35th place from 50th.
"London and New York have long vied for the top spot of this index and the uncertainty around the future shape of Brexit is likely to be a factor in their latest switch in positions. In a competitive world we cannot afford complacency," said Miles Celic, chief executive of the lobbying group TheCityUK.
A Bank of England official expressed optimism on Wednesday about the future. "The big point ... regardless of what happens with Brexit is that Britain will remain a global financial centre," Alex Brazier, the central bank's executive director for financial stability, told WalesOnline.
"There may be some jobs moving as firms execute their contingency plans, but I don't expect the big picture to change," he said.