IN the past month, post-Olympics euphoria has been replaced by a more sober atmosphere. Downgraded growth forecasts and increased inflation expectations paint a decidedly mixed picture of the state of the economy.
And to add to the woes, last week the Centre for Economics and Business Research claimed that the number of financial services jobs in London has dropped below New York, and will slip behind Hong Kong by 2015.
Although this data does not correspond with other surveys, the City is clearly undergoing a readjustment, as certain parts of the industry adapt to a challenging economic environment. Investment banking, in particular, is facing up to a new regulatory landscape. The impact of tougher capital and leverage requirements can be seen in recent job cuts at UBS and Deutsche Bank.
London will be affected by this global trend given the considerable presence of these institutions here. But to misquote Mark Twain, the reports of the City’s death have been greatly exaggerated.
The success of a financial centre is not just defined by headcount. London remains the leading international financial centre. It accounts for the largest share of the world’s foreign exchange trading at 38.1 per cent, compared with 17.9 per cent for New York and 5.6 per cent for Singapore.
Even as parts of the financial services industry downscale, others – including insurance and fund management – are expanding. London’s role as an international centre for renminbi trading also offers significant growth potential.
This is important nationally. Contrary to public perception, the majority of financial services jobs located in London are outside the City, and most of the industry’s jobs in the UK are outside London. JP Morgan, for example, is the biggest employer in Bournemouth; Deutsche Bank has a considerable presence in Birmingham; Citigroup has a significant interest in Belfast.
So what is good for the City is good for London and vice versa. And what is good for London is good for the country and vice versa.
Of course, the physical City remains the recognised centre of the industry and provides the range of services that continue to make it internationally attractive – even as the cluster evolves to increasingly encompass technology, media and other sectors.
Over the next few years, we will have a tough job defending London’s position against Singapore, Hong Kong, Shanghai and other financial centres serving the rapidly growing Asian economies. This will be against a backdrop of some uncertainty in respect of Britain’s position in Europe. But London’s position remains a strong one because of its openness, expertise and stability. We will continue to promote London’s position as the world’s leading financial centre, not for its own sake but because of the contribution that it makes to London’s and Britain’s economy.
Mark Boleat is chairman of the policy and resources committee at the City of London Corporation.