Global investors back London to retain financial centre crown after Brexit

William Turvill and Jake Cordell
General Election - Economy
The UK voted to leave the European Union on 23 June (Source: Getty)

London will retain its position as a world-leading financial centre despite last week’s Brexit vote, according to a poll of global institutional investors seen by City A.M.

Two-thirds of those surveyed by FTI Consulting said the capital is unlikely to lose this coveted status.

The results of the survey emerge as the FTSE 100 staged a bounce back from the post-Brexit blues yesterday, finishing up 3.6 per cent at 6,360.06 – its highest closing level since April.

Read more: Nearly a fifth of Londoners are less likely to sell their home post-Brexit

The more UK-focused FTSE 250 remains nearly eight per cent down, however, reflecting the lingering effect of post-referendum uncertainty. Sterling is still below $1.35, compared to $1.50 a week ago.

Nonetheless, seven in 10 of those surveyed by FTI expect mergers and acquisitions (M&A) activity to increase for UK-listed stocks as sterling drops, with North America identified as the most likely region to show interest.

The majority of respondents expect industrials to be the top targeted sector, followed by technology, consumer goods and healthcare.

From 27-29 June FTI surveyed 100 global institutional investors with more than $8 trillion of assets under management.

More than half (53 per cent) expect the UK to retain access to the EU’s single market. And while 76 per cent believe UK trade with the EU will decrease, 59 per cent said they expect trade outside of the EU to increase.

However, 67 per cent of investors thought it likely that the referendum result will trigger a recession in the next year.

Nearly all (98 per cent) said they believe the decision to leave the EU will lead to worse economic conditions as soon as the UK officially splits. But this figure reduces to 64 per cent two years on, and 36 per cent five years on. A decade later, 76 per cent of the survey participants expect better economic conditions.

Read more: London HQ of merged stock exchange in doubt after Brexit

Meanwhile, Savvas Savouri, chief economist at Toscafund, yesterday called on investors to dismiss “alarmist” talk that the UK will enter a recession and argued that Britain has many opportunities.

Savouri acknowledges his prediction of GDP growth of around 1.8 to 2.2 per cent in 2017 puts him at odds with most of the economic community. A poll of economists for Bloomberg, for instance, found three-quarters expect the UK to fall into a recession at some point in the next 18 months.

A separate report from BMI Research – a subsidiary of the ratings agency Fitch – said that leaving the EU could be a net positive for the UK economy, but added that this is dependent on securing good terms of exit and adopting the right policy mix.

Stuart Allsopp at BMI said: “The UK has one of the most attractive business environments in the EU and indeed the world, and this will remain the case.”

The show of support for London in the FTI survey comes despite the fact 49 per cent said they believe it likely that some companies will re-locate from the UK to EU countries.

Brexit Britain: What you need to know