New York overtakes London as world finance centre by Julian Korek, CEO, Kinetic Partners on 20-Nov-2013

New York has overtaken London as the world’s leading financial centre, according to a survey of senior financial services executives commissioned by Kinetic Partners. In addition, London’s influence is expected to decline in coming years - only a quarter of banking, asset management and hedge funds leaders now think that London will still be a contender for the world’s pre-eminent global financial centre in five years’ time.

The survey for Kinetic's 2014 Global Regulatory Outlook report sees the proportion naming London as the leading financial centre drop to 40%, down from 65% in the same survey last year, while 49% now opt for New York, up from 31% a year ago. Looking forward, 40% still expect New York to lead the finance world in 2018, but just 26% – and only 24% of the 132 chief executives questioned – think the same of London, down from 41% last year.

"Despite all the turbulence in global financial markets over the past five years, New York continues to host institutions who are focused on building strong returns for investors," said Chris Lombardy, Regulatory lead in New York. "Whilst new regulations have been debated and enacted in many cases, the industry has largely adapted, and confidence appears strong in New York."

"London’s decline seems to be accelerating as it loses ground to traditional competitors, as well as the rising markets of the East," says Julian Korek, CEO and Founding Member of Kinetic Partners. "As London falls, Hong Kong and Shanghai are gaining ground."

One in ten respondents (10%) name Hong Kong as a contender for the leading centre in five years, compared with 3% who believe that it leads today. There was some optimism about Singapore as well, with 6% marking it for future leadership, against 1% today. Shanghai, however, clearly attracts the most attention.

When asked to name the leading emerging financial centre in 2018, almost half (48%) of respondents name Shanghai, while just 7% mention Dubai and Sao Paulo, the second most popular choices. More than one in five (22%) are not sure which emerging market will be the next leader.

"The emergence of Shanghai as a future global financial centre is a major theme in this years’ survey," continues Julian. "As our report notes, Shanghai still faces significant challenges to attract international business and develop regulatory expertise, but it’s also not alone. Given that China also has financial expertise centred in Hong Kong, as well as a fast growing, but lesser known, financial services centre in Shenzen, if China’s model proves successful it will be copied in similar centres. As such, rising competition for markets such as London is only going to grow."

The survey also reveals widespread frustration with regulators’ efforts when it comes to stabilising the financial system, protecting investors, reacting to public opinion and creating a framework for growth. Almost half (49%) of those questioned believe that no regulator anywhere has struck the right balance between these competing priorities.

"Our research shows that the biggest factor in determining where respondents look to do business is the commercial opportunities on offer. More than three quarters (77%) rank it as the most important issue when choosing where to do business, against just 24% who cite regulatory requirements as a decisive factor" concludes Julian.

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