London has lost its crown as the world’s top financial centre to New York, rankings reveal, in a sign that uncertainty over Brexit is causing harm to the capital’s attractiveness.
Financial services firms in London are already making plans to move resources to other places in the EU to make sure they can still trade with the bloc after Brexit next March.
The global financial centre’s index by Z/Yen, which ranks cities on factors such as regulation, wages and infrastructure, confirmed that New York had overthrown London for the first time since 2015.
Meanwhile, European cities, including Frankfurt, Amsterdam and Zurich, grew “significantly” in the rankings, and they may be “the main beneficiaries of the uncertainty caused by Brexit”, according to report.
The shake-up comes as US president Donald Trump cuts corporation tax and proceeds his financial deregulation agenda in a boon to Wall Street. Some US bankers have called for the UK to follow actions to stay competitive after Brexit.
FT analysis in December showed that the UK’s leading international banks organised to move about 4,600 jobs from London, while a study from EY suggested that 10,500 could leave “on day one”.
Largest financial institutions have now chosen their post-Brexit centres and started demanding proper licences, with Paris, Dublin and Frankfurt among the most popular destinations.
Still, Paris, which has launched a charm offensive to woo City of London business with promises to row back on red tape and cut taxes, only moved up one place in the Z/Yen ranking to 23rd, while Dublin fell six spots to 37th.
Hong Kong came in third, Singapore fourth and Shanghai fifth, continuing a longer-term trend of gains for centres in the Asia/Pacific region.
Lobby groups, responding to the news, urged politicians to agree to a Brexit deal.
“London and New York have long vied for the top spot of this index, and the uncertainty around the future shape of Brexit is likely to be [a] factor in their latest switch in positions,” said the chief executive officer of TheCityUK, Miles Celic.
“The world is watching to see if the UK and the EU can overcome the political hurdles around Brexit and secure a deal that makes economic sense.”
The chief executive of UK Finance, Stephen Jones said: “The UK remains a world-leading financial centre and it is essential we work hard to maintain this position post-Brexit.
“It is also crucial to provide firms with certainty over future financial services trade between the UK and EU and to maintain access to the best talent from Europe and around the world.”
Financial services, which are about 12 per cent of Britain’s economy and pay more tax than any industry, potentially have a lot to lose from the end of restricted path to the EU.