London remains regulatory leader despite challenge from NYC

London is continuing to lose ground as the world’s leading financial centre, but the UK remains the world’s favourite regulatory regime, according to research by Duff & Phelps which surveyed 250 global financial sector professionals.

The company’s Global Regulatory Outlook (GRO) report found only 31 per cent of those surveyed perceive London to be the foremost global financial centre, down from 34 per cent last year and a fall of 22 per cent since 2018.

New York is cementing its dominance as the world’s leading financial centre according to the report, with 60 per cent of senior financial services decision makers globally giving it the top spot - an increase of 56 per cent year-on-year.

In addition, only 15 per cent of respondents expect the Biden administration in the U.S. to legislate for stricter financial regulation.

The report claimed that with the full implications of Brexit still unclear, no clear European successor to London has emerged and that no other European city is seen as the main global financial hub by respondents.

The company’s research suggested that London’s regulatory environment has played a role in maintaining its importance, the UK was named the world’s favourite regulatory regime by 31 per cent of those surveyed, compared to 25 per cent who picked the U.S. or Singapore.

The report went on to claim that East Asia looks is the most likely future financial hub among emerging markets, and 64 per cent of respondents marked China as the most likely future country.

11 per cent of respondents said Shanghai and 7 per cent said Hong Kong when asked to name the preeminent global financial hub city in five years, while 18 per cent named London.

The report also earmarked the potential of other emerging economies and said that 16 per cent of respondents thought that India has the greatest potential to be the next big global financial hub.

“New York has continued to gain at London’s expense over the last few years,” said Monique Melis, managing director at Duff & Phelps. “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.”

“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.”

She added: “As long as regulatory considerations continue to inform decision making, London has an opportunity to preserve its relevance.”

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