London clings to top spot as finance hub

LONDON clung to the top place on a list of the most important global financial centres yesterday but saw its lead over rivals slashed to almost zero as its competitive edge vanished, a new report showed.

In a worrying sign that the City is losing its place as the world’s leading finance hub, London’s competitiveness score fell one point in 2011, leaving it just one point ahead of its biggest rival New York, according to the Global Financial Centres Index.

Hong Kong jumped 11 points to take third place in the ranking, which assesses factors such as business environment, market access and talent. It now sits just four points below London, while Singapore and Shanghai made double-digit gains.

The index’s publisher Long Finance said the margin between London and its next two rivals was negligible.

“There is no significant difference between London, New York and Hong Kong in the ratings,” it said, warning: “London in particular must not rest on its laurels.”

“The Vickers report recommends some fairly fundamental reforms of the banking and many in the sector believe that these might damage the competitiveness of London. Furthermore, tax levels in the UK are unpopular within the financial services sector,” it added.

London is still the clear leader within Europe, where its nearest competitor is Zurich, ranked eighth. Frankfurt, the nearest Eurozone rival, was ranked 16th and the report said “it does not appear that London will be overtaken any time soon”.

But Long Finance said the survey showed demand for finance centres in each time zone, with London, New York and Hong Kong filling the three major trading sessions worldwide.

“If you are one of the big banks you need a presence in New York, London and Hong Kong – you cannot claim to be global otherwise,” one Hong Kong-based banker told the survey.

The popularity of offshore centres fell in the past year, but survey respondents believed South Korea’s capital Seoul, Shanghai and Singapore were most likely to gain ground as financial centres in future.