London forfeits title of ‘global financial hub’ to New York

28 May 2019 Consultancy.uk

London has lost its title as the world financial hub to New York, just a year after gaining it, according to a survey of financial sector professionals around the world. Citing Brexit as the chief factor that has tarnished the UK capital’s reputation, respondents also said the situation is unlikely to improve in the coming five years.

Stability is a key ingredient when it comes to the success of any company. While shrewd investors might find volatile markets or crashes an ideal time for picking value stocks at bargain prices, in the long term, the idea that a market will return to ‘normality’ is a key ingredient for companies to sink capital into any geographical region.

For businesses operating internationally, political risk is a key factor for the businesses’ outlook and future prosperity. Since the fateful referendum of 2016, Britain has been transformed into one of the world’s least stable markets. The situation was exacerbated by an inconclusive election in 2017, which saw the Government lose its Parliamentary majority, essentially dooming its chances of forcing through a Brexit deal.

London forfeits title of ‘global financial hub’ to New York

With Theresa May announcing her resignation for June 7th, and the Westminster consensus disintegrating around the embattled minority Government, the idea of a ‘strong and stable’ Britain has evaporated. In this context, it is not difficult to see why a new study from Duff & Phelps found that London has lost its crown of ‘global financial hub’.

The survey found that London is no longer perceived as the world’s preeminent financial centre by financial sector professionals, with just 36% currently viewing London as the foremost global financial hub, a 17% decrease from last year. New York is now seen as the world’s financial centre by 52% of respondents, a 10% increase from 2018. This illustrates just how inconsistent and uncertain markets have become amid the globe’s heightened geo-political tension, as last year the same report found that London had taken the title. New York had been in a leading position in 2017, with 58% to 36%.

There are multiple factors at play during the repeated shifts of the last three years, but the animosity of Donald Trump’s presidency to foreign traders, as well as the lowered value of the pound, likely played key roles. The two trends likely pushed more investors to back London in 2018, on the premise the temporarily cheapened market would rebound and return to stability in the near future. When that failed to materialise and America’s economy continued to perform strongly, it may well have pushed the dial back in favour of New York.

Looking ahead five years, respondents’ confidence in London returning to the top spot does not improve either. Only 21% of respondents said that London would be the world’s financial centre in 2024, while confidence in New York’s ability to maintain its place sat at 44%. Meanwhile, Hong Kong was picked as the number one city by 12%, signalling the beginning of the ‘Age of Asia’, combined with reduced confidence in the outlook for the UK’s capital post-Brexit.

Commenting on the findings, Monique Melis, a Managing Director at Duff & Phelps, said, “Brexit has cast a shadow of uncertainty over the UK’s world-class financial sector and its ability to dominate other major financial hubs in the coming years. Looking ahead, we see the combined effects of Brexit and the emergence of Asia with respondents expecting Hong Kong to play a bigger role as a leading global financial centre.”


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