Financial executives sceptical on London’s future
Survey finds bankers expect New York to benefit from Brexit
Financial groups are betting on New York rather than London being the big winner from Brexit, a new survey of senior executives has found.
Confidence in the UK’s position as a global financial centre is weakening among professionals around the world, according to a new survey by Duff & Phelps, the corporate financial advisory firm.
While 36 per cent named London the pre-eminent financial hub this year compared with 58 per cent picking New York, that figure plummeted when it came to forecasting the world’s most important financial centre in five years’ time.
Just 16 per cent of respondents chose London to top the table in 2022 but those picking New York remained steady, according to the survey of 183 senior executives at investment banks and asset managers across the globe.
Roughly 390,000 people currently work in financial services in London, compared with 330,000 in New York, according to the Bank of England.
The UK is due within a matter of weeks to trigger the official Article 50 two-year divorce proceedings by which it will leave the EU.
The Duff & Phelps findings come after recent upbeat statements from financial companies. Jes Staley, the chief executive of Barclays, said last week that the bank believes London will retain its position as Europe’s financial hub, while Unigestion, the Swiss investment house, has made similar statements.
A significant part of London’s historic business has rested on serving as a gateway to the rest of the EU. US investment banks, for example, have based themselves in the City and then used an EU “passport” to provide services to the other 27 nations without having to set up expensive subsidiaries on the continent.
With hopes of retaining passporting rights dwindling, the UK may seek to maintain a regulatory regime that is broadly equivalent to that in Brussels as a way of preserving some kind of access. It may instead opt to lighten regulatory rules in an attempt to attract more business.
“Recent political turmoil coupled with scepticism regarding the efficacy of financial regulations means uncertainty reigns in most financial compliance departments today. Although the UK is expected to be in a good position in terms of third-country equivalence, firms are looking for further stability from regulators,” said Julian Korek, managing director at Duff & Phelps.
“Fund managers and bankers clearly lack confidence in the current regulatory regime, which may provide a level of support for those governments seeking to make significant changes,” he added.
While the Article 50 divorce process runs over two years, more than a third of respondents to the survey expect that Brexit will affect their compliance arrangements either immediately or within 18 months. A handful replied that changes have already begun to be implemented.
The survey’s respondents were generally sceptical of the current regulatory regime, with just one-in-ten agreeing that changes since the financial crisis had done enough to prevent future crashes.
However, recent rules around the world — including in Hong Kong, the UK and the US — to make senior executives more accountable for failings on their watch were considered to be consequential: 54 per cent of respondents said such regimes have a positive impact on the financial services industry.