New York top financial city for second consecutive year
More than half (56%) of financial professionals said New York is the world’s preeminent financial sector, according to a survey from advisory firm Duff & Phelps. The consultancy’s survey polled 240 global senior-level financial services professionals in December and January.
New York has seen its stock rise 33% over the last two years of the survey. London, meanwhile, has seen a more than 20% drop in the number of professionals viewing it as the foremost global financial hub in the last two years. Only thirty-four percent tagged London as the top financial city this year, as three years of Brexit uncertainty have driven a fall from grace.
“It is difficult to avoid the suspicion that three years of uncertainty since the Brexit vote has contributed to London’s fall. While London was still considered the preeminent financial hub in 2018, it could be that the shockwaves of the ongoing EU negotiations have started to show,” Monique Melis, managing director and global leader of compliance and regulatory consulting at Duff & Phelps, said.
Though the Brexit withdrawal agreement was finally signed in January, and trade talks between the EU and UK are currently underway, respondents aren’t optimistic about London regaining its stature. Only 22% said they expect it to be the major financial center in five years’ time. Fifty percent said they still expect New York to be the leading financial center.
Emerging centers in Asia are expected to see major growth, according to the Duff & Phelps survey. Respondents picked Honk Kong (4%), Singapore (5%) and Shanghai (9%) as the preeminent financial hub in five years. Only 1% picked Paris, and 2% selected Frankfurt.
The bright spot for London was that the UK was selected as having the most favorable regulatory regime for financial services; 30% ranked the UK first, while 26% picked the US and 18% picked Singapore.
The cost of compliance has continued to grow for financial services firms, with 34% reporting they now spend more than 5% of their budget on compliance – an increase of 11% from 2018.
“We must accept the fact that much of the global regulation we’re seeing is necessary to deliver a stable market. But we cannot ignore the impact that extensive, and often uncoordinated regulatory change has had on competition and services,” said Melis. “If the Government can position the UK as having a more favorable regulatory environment and separate it from the red tape of European regulation, then we may see the UK win back its crown and attract new talent to the sector.”
The UK government will likely work hard to be “open for business,” as the financial services sector accounts for 7% of the UK’s economic output, and contributes £29 billion in tax revenues. But for now, London’s pain is New York’s gain.
