London’s financial services sector has defied expectations and flourished after Brexit, according to new research from the City of London Corporation. Contrary to predictions of job losses and economic decline, the study demonstrates that London remains the leading global financial center. The research utilizes external metrics to evaluate various aspects of the financial and professional services sector, including financial activity, regulatory ecosystem, talent and skills, and business infrastructure.
While it is true that high-value firms have opted to list in New York rather than the UK, this does not diminish London’s position as a global financial hub. The US dominates equity markets in terms of market capitalization and trading volume, but London holds a strong presence in bond markets, foreign exchange, and cross-border banking. Furthermore, London’s tech sector is growing, making the UK the third-largest tech ecosystem globally. The city is also a leader in green finance, and its regulatory regime is highly regarded worldwide.
The research findings highlight the resilience and strength of London’s business ecosystem, with a significant increase in foreign direct investment (FDI) in financial and professional services. The sector witnessed a 68% increase in FDI from 2021 to 2022, with asset managers, fintech companies, and investment banks establishing offices in London. The post-Brexit reforms, such as the Financial Services and Markets Act, have attracted international businesses seeking to invest in the UK.
However, the study also identifies areas for improvement. Capital markets activity in the UK has experienced a decline, partly due to a risk-averse culture that emerged after the financial crash. Policymakers must strike a balance between regulation and innovation to encourage capital market growth. Recent reforms, such as the Mansion House reforms and listing legislation changes by the Financial Conduct Authority, aim to make it easier for companies to list on the London Stock Exchange.
Additionally, the UK’s business infrastructure should be more efficient. The report highlights high visa costs, which act as a significant barrier for highly skilled workers. Compared to other global financial centers, the UK has the highest visa costs, limiting access for overseas experts in AI, life sciences, and tech. Addressing this issue is crucial to maintaining the financial and professional services sector’s success.
To further strengthen the industry’s growth and maintain its leading position, the report suggests the creation of a financial and professional services sector council. Similar councils have proven successful in other markets like Singapore and Ireland. Implementing a long-term roadmap for the industry will help the UK widen the gap with its competitors and boost prosperity across the nation.
In conclusion, despite initial concerns about the impact of Brexit on the financial services sector, London has emerged as the world’s leading global financial center. The research highlights the city’s dominance in various areas, such as bond markets, green finance, and regulatory excellence. However, policymakers should address challenges in capital markets activity, skills shortages, and visa costs to ensure sustained growth and success. By prioritizing policy reforms and engaging in strategic planning, the UK can continue to thrive as a global financial powerhouse.
