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Will London Remain Europe’s Global Financial Center?

Is London at risk of decoupling from New York City as the “other” Western global financial center? Likely not. London provides access to trading in European and Asian financial markets, and the ease of doing business particularly between the two countries—especially given a common language—should not be discounted.

There are more listed financial firms domiciled in the UK (581) than in other European countries including France (496), Germany (343), Italy (80) or Spain (73). The Bank for International Settlements’ most recent triennial survey shows that more global foreign exchange trading was done in the UK (40.9%) than in France, Germany, Italy and Spain combined (5.5%). And while London bested New York as the most competitive place to do business in 2015 as measured by the Z/Yen Group, the only other European city to make the “Top Ten” list was Zurich.

London’s ties to New York will likely continue as long as China continues to be a major source of global growth and demand. Chinese banks, including the Industrial and Commercial Bank of China and the China Construction Bank, have been allowed to open branches in London; China Construction Bank also opened Europe’s first clearing bank for renminbi outside of Asia in London. More recently, China completed its first overseas sale of government debt denominated in renminbi. Where did the sale occur? In London.

What would make a closer relationship between New York and another European city (such as Berlin or Paris) more likely? A decision by Britain to exit the EU, and the loss of any connection to the Eurozone. But even then, it would take years for another city to build up the technical capabilities that would enable it to leapfrog ahead of London’s current financial architecture.

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Heidi Learner

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