Paris and Frankfurt have their work cut out if they are going to seriously challenge the City of London.
That is the conclusion of an analysis by London-based think tank New Financial, which found five times more international financial activity in the UK than France or Germany.
While the report relies on data from 2019 — before Brexit came into effect, and before London lost its crown as Europe’s top place to buy and sell shares — it underlines the City’s lead over European rivals as a hub for derivatives and foreign-exchange trading, asset management, venture capital and banking.
That advantage, built up over decades, has been dented by Brexit in recent years. Financial firms have been unable to use their London bases for some business inside the bloc, forcing banks including JPMorgan Chase & Co and Goldman Sachs Group to move hundreds of billions of dollars in assets and thousands of staff to the continent. But London, for now, remains Europe’s dominant financial hub.
“This report shows you would have to move a huge amount of activity from the UK before France, Germany or any other EU financial centre is significantly closing that gap,” William Wright, New Financial’s managing director, said in an email. Wright said that even if 10% of all international activity in the UK were to relocate, the country “would still be a long way ahead.”
Uncertain Future
More business may shift away from London. The Brexit trade deal left out financial services, while a separate accord on how EU and UK financial regulators would cooperate has also run into problems as overall relations threaten to turn sour. The bloc has signalled it’s in no rush to grant so-called equivalence decisions that would enable European business to be done from London.
The UK ranked as the world’s second- largest financial centre, after the US, according to the report. China was third, while France and Germany were sixth and seventh respectively. While the UK may still be ahead of its European rivals, the report shows it is well behind the US, and it has lost further ground since 2019. The City of London lost GBP 2.3 trillion ($4.3 trillion) of its lucrative derivatives trading business in March alone, according to an estimate by Deloitte and IHS Markit, with Wall Street trading platforms gaining the most. — Bloomberg
Photo: Bloomberg
