Duff & Phelps, a provider of governance, risk and transparency solutions today release its latest Global Regulatory Outlook (GRO) report, which found that London continues to lose ground as the world’s leading financial centre.
Duff & Phelps surveyed 250 senior financial sector professionals from around the world, and in 2021, only 31% of senior financial professionals perceive London to be the foremost global financial centre, down from 34% last year, and a fall of 22% since 2018.
New York continues to cement its dominance as the world’s leading financial centre, with 60% of senior financial services decision-makers globally now naming it the top financial centre (an increase from 56% last year).
Additionally, only 15% of respondents expect the Biden administration in the US to bring in stricter financial regulation. Across the pond, with the full effects and implications of Brexit yet to play out, no clear European successor to London has emerged.
Monique Melis, Managing Director and Global Service Leader of Compliance and Regulatory Consulting at Duff & Phelps, said: “New York has continued to gain at London’s expense over the last few years. The start of 2021 saw the UK and the U.S. arrive at what may be the beginning of new eras for both countries. In the UK, arrival at a Brexit deal marks the start of Britain’s journey outside the EU and the Biden presidency could see potentially profound policy changes in the U.S. The future momentum and trajectory of either country’s financial services sector strategy is not set in stone.”
Both Paris and Frankfurt have been touted as potential alternatives to London post-Brexit, but Duff & Phelps’ research found that any such move is still some way off. No other European city is seen as the preeminent global financial hub according to the survey respondents. However, the research suggested that London’s regulatory environment has played an important role in maintaining its importance and could be key to doing so in the future. The UK is still the world’s favourite regulatory regime, named by 31% of those surveyed, compared to 25% for the U.S. and the same for Singapore.
Melis continued: “Despite London’s recent decline, the UK continues to retain some important advantages, particularly its regulatory environment where it’s still ranked ahead of the U.S. and Singapore. This unique advantage could be the key to keeping London competitive, particularly as compliance costs for businesses continue to grow. As long as regulatory considerations continue to inform decision making, London has an opportunity to preserve its relevance.”
East Asia looks set to be the most likely future financial hub among all other emerging markets—almost two-thirds (64%) in the survey marked China as the most likely future candidate. When asked to name the likely preeminent global financial hub in five years, 11% said Shanghai and 7% Hong Kong. When combined this was the same proportion who named London (18%) as the most likely leading global financial centre in five years.
While China dominates among the emerging markets when it comes to financial centres, other countries are also likely to see their financial centres grow. Chief among them is India. About one in six (16%) of respondents said that the country has the greatest potential to be the next big global financial hub.