New York ousts London as top financial centre amid concerns about Britain’s future in the EU, scandals in the City and a growing regulatory burden

Last updated: March 15, 2014 12:00 am

New York ousts London as top financial centre

By James Pickford, London and Southeast Correspondent

London has lost the top slot in a barometer of global financial centres amid concerns about Britain’s future in the EU, scandals in the City and a growing regulatory burden.

The British capital was overtaken by New York in the Global Financial Centres Index after its ratings fell more than any other centre in the top 50.

The top four cities in the twice-yearly survey by consultancy Z/Yen Group remain the same: London, New York, Singapore and Hong Kong. Since the ranking was set up in 2007, London has held on to a fragile lead over New York, with the two Asian centres gradually closing the gap.

Mark Yeandle, senior consultant at Z/Yen, said London had been pulled down by a number of problems. “They’ve all been there for a while but we’ve reached a tipping point.”

Mark Boleat, policy chairman of the City of London Corporation, said the survey was “a useful broad brush indicator but the methodology is such that no great significance should be read into movements from one half-year to another”. He pointed to the “statistically insignificant” two-point lead that New York had gained out of a possible total of 1,000.

However he agreed that the question of Britain’s place in Europe – before a possible referendum on membership – was influencing financial institutions’ decisions about where to allocate resources and expand operations.

One City banker said long-term political questions – not only on Europe but also Scottish independence – were unsettling many in the markets. “In the course of a year or two, the structure of the United Kingdom and the way it works could be completely transformed. And if investors dislike one thing, it’s uncertainty.”

That London’s reputation is under scrutiny is made clear in the survey. It has been hit harder than other centres by scandals over the manipulation of the London interbank offered rate and foreign exchange rates because of its larger market share. UK banks also face payouts approaching a combined £20bn for historic mis-selling of payment protection insurance. Michael Mainelli, chief executive of Z/Yen, said the drip-feed of damaging stories posed a threat to the City.

Moves by banks and other financial institutions to ramp up their procedures and hire more compliance staff are seen by many as an essential response. But some believe the rapid expansion of regulatory activity is also stifling the entrepreneurialism essential to a healthy Square Mile. Traders responding to the research said increased oversight made it harder to go against the market grain and take advantage of counterintuitive opportunities. “Because London is less of a swashbuckling place there’s less opportunity to make money,” Mr Yeandle said.

In depth

The crackdown on bankers’ bonuses was another factor cited. One London-based European bank employee said the harsher climate was leading to people moving to the US or Asian centres. “Some of my team has gone to the US, partly for personal reasons but also because of the regulatory creep in the City. They’re continuing to restrict how much you can pay, whereas US banks don’t face the same constraints,” the person said.

There remain difficulties for London business in obtaining UK visas for non-EU professionals, the research suggested, particularly as the approaching general election pushed immigration up the political agenda.

Yet despite the problems, London remains, in Europe at least, a good distance ahead of its rivals. One banker recalled a meeting in Sweden with a colleague formerly based in the City. “He was really missing the place. As a finance professional, I still don’t think there’s anywhere else in Europe that comes close to matching it.”

The survey, the 15th since its launch in 2007, quizzed 3,246 respondents. It combined their assessments of the changing competitiveness of financial centres with a ranking of objective factors such as infrastructure, the availability of skilled staff and access to international markets.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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