The City retains its top slot for a third year running – thwarting dire predictions and a raft of political and economic challenges, reports Matthew Hardeman
London has retained its title as the world’s top financial centre, beating out global rivals such as New York, Hong Kong and Singapore for the third year running, according to a new study.
The capital slipped just two points to 780 in this year’s Z/Yen’s Global Financial Centres Index – a smaller decline than every other top ten city in the rankings, despite continued economic headwinds and uncertainty surrounding a final Brexit deal with Europe. The figures showed London extending its lead over its rivals, which saw bigger declines. New York fared the worst from the top set, falling 24 points to 756, while coming second overall.
The news comes as City supremos issued more stark warnings that securing a favourable Brexit deal will be critical to maintaining London’s pole position and long-term financial health.
‘The UK has ranked top of this survey for the last two years, thanks to its technological innovations, financial infrastructure regulatory frameworks and its ability to attract international talent,’ says City of London Corporation policy chairman Catherine McGuiness. ‘But the sector is approaching a precipice. Firms do not yet know how they are expected to conduct business here in the short or long term. If we don’t have progress on Brexit negotiations, firms based here will have no choice but to relocate some elements of their business elsewhere.’
While almost every city in the rankings took a hit in the points tally due to the uncertainty affecting financial services globally, London’s competitors in Europe consolidated their positions: Frankfurt, Paris, Dublin and Amsterdam all fared better than last year, according to the index, which was based on a poll of financial services professionals around the world, and cross-referenced with Z/Yen’s own analysis of quantitative data from third parties including the World Bank and the Economist Intelligence Unit.
The annual face-off saw London draw from a well of strengths to maintain its lead, according to Z/Yen Index co-creator and associate director Mark Yeandle. He was surprised to see that the capital didn’t fall further while struggling against strong political and economic headwinds, but is clear why it remains in the big league: ‘London still has a huge number of strengths: it’s got sterling, it’s got availability of good staff, it’s got the English language, it’s got the European timezone – which is important, even if it isn’t in the EU,’ he tells Spear’s. ‘It won’t be usurped overnight – there won’t be a mass exodus from London.’
Yeandle cautions that, while the City could see some adjustment in headcounts with some firms relocating certain roles to Europe, it will maintain ‘what it’s good at – innovation, and getting people talking to each other’. ‘London’s had a history of being the first to act on initiatives – that’s why it has such good commodity exchanges, and such good leads in currency exchange,’ he explains, pointing to London’s healthy armoury of ancillary extras, such as its liquidity across major markets, heavyweight insurance sector and the likes of the Baltic Exchange.
‘[London] has to maintain its innovation, and I think it has to accept that things don’t stay the same forever – it certainly can’t sit on its laurels. It needs to work out where the next growth sectors are. Everyone’s talking about fintech at the moment, but London is already a leader in fintech. It’s already doing most of the right things.’
London was not the only city with firm footing. Established centres such as New York, Singapore, Hong Kong and Tokyo maintained their dominance, though several emerging cities have also gained traction, making ‘tremendous’ strides as new economies and financial centres, according to the report. Abu Dhabi made the top 25 for the first time, joining Dubai, which came in 20th.
And if the report is to be believed, Paris can forget any hope of stealing London’s financial thunder post-Brexit – despite gaining two points over last year: the French capital came in one place behind Abu Dhabi in 26th place – six places even behind the Chinese city of Shenzhen.
Meanwhile, the biggest losers sat squarely in the United States, thanks to the economic uncertainty brought about by the Trump administration. Its leadership has proven more dysfunctional and erratic than markets expected, with protectionist policies plaguing projections for international trade. San Francisco lost 31 points, putting it in 16th place – 10 places lower than last year – while Washington DC and Chicago both lost a staggering 40 points each.
Needless to say, the results are good news for Britain – very good news, if accurate. And despite a wall of distinctly negative omens emanating from the Brexit negotiations in Brussels, the capital’s strengths stand it in good stead for the foreseeable future. ‘I can’t see London falling out of the top five anytime soon,’ says Yeandle. ‘Successful, multicultural, welcoming cities are always going to be towards the top of the list – and London is likely to remain one of those centres.’
To view the full rankings and report click here
Matthew Hardeman is Senior Researcher at Spear's