London has maintained its position as the world’s number one global financial centre, according to a major international study out today, extending its lead over rivals New York, Hong Kong and Singapore.
However, City chiefs have warned that London’s supremacy will come under threat if the government does not secure the right kind of Brexit deal.
Amid political uncertainty, London’s overall ranking fell by just two points, to 780, on the Z/Yen index, which analyses the competitiveness of over 100 cities and territories across 20 different categories. London experienced a smaller drop than every other top 10 city, with second placed New York faring worst, falling 24 points to 756.
However, Frankfurt, Paris, Dublin and Amsterdam – cities vying to win financial services from London as firms consider shifting resources into the EU ahead of Brexit – all added to their scores and rose up the table.
“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,” said City of London Corporation policy chairman Catherine McGuinness.
“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.”
She added: “The sector needs clarity on immigration policies, agreement now on transitional arrangements and a clearer idea of how it can continue to trade post-Brexit.”
Her sentiment was echoed by Miles Celic, chief executive of TheCityUK. As well as encouraging London to continue innovating to avoid “complacency”, he said the “right Brexit deal will also be a critical component”.
He added: “With that in mind, the most urgent and immediate priority for the industry from the negotiations is clarity on time-limited and legally-binding transitional arrangements.
“Absent this, many firms have already started to activate their contingency plans and others will undoubtedly follow suit if these aren’t confirmed as soon as possible – and by the end of this year at the very latest.”
Brexit secretary David Davis is under pressure from the City to publish a position paper on financial and professional services.
As part of the index, London was ranked top for business environment, human capital, infrastructure, financial sector development and reputation. It also came top for banking, investment management, professional services and the government and regulatory sub-sectors of financial services.
Report author Mark Yeandle told City A.M. that London still faces a major test in the form of Brexit. But he added: “Even if London comes out of the EU, it’s still going to have sterling, it’s still going to have the English language, it’s still going to be in the European timezone.
“London’s still got availability of excellent skilled labour, London’s still got a spirit of innovation. It’s still got so many institutions – not just the stock exchange, but the Baltic Exchange, and Lloyd’s. The world trades in London. And even outside of the EU, those things aren’t going to evaporate overnight.”
Meanwhile, the latest Lloyds Bank PMI figures today show that employment in London’s private sector rose at the fastest rate for more than 18 months in August. A 10th consecutive month of job creation came despite London PMI falling from 53.2 in July to 52.8 in August.