London remains the world’s financial top dog with New York second in the league but Brexit and the US presidential election have taken a toll on their standing, according to study by London-based research firm Z/Yen.
The twenty-first Global Financial Centres Index (GFCI 21), compiled by Z/Yen in collaboration with Shenzhen-based think tank China Development Institute, is the latest in a series of half-yearly snapshots of how the world’s financial centres are faring.
GFCI 21 index is based on 100 instrumental factors, with the quantitative measures used by the researchers provided by third parties including the World Bank, The Economist Intelligence Unit, the OECD and the United Nations.
The main index covers 88 financial centres around the world. It shows that while there no change versus historic readings in the top five positions (London, New York, Singapore, Hong Kong and Tokyo), Brexit and the US election cost two top dogs 13 and 14 points respectively – the largest declines (except for Calgary) among the top 50 financial centres. (See table 1 below for the top ten)
The study furthermore shows that London and New York, in line with long term trend, are continuing to lose ground to Asian rivals. The gap between third place Singapore and second place New York is continuing to close while Singapore rose by eight points and is now only 20 points behind New York having been 42 points behind in GFCI 20, the previous half yearly reading.
The rise of Asian centres has had a broader impact with index ratings for Western European financial centres volatile. Of the 29 GFCI centres in the region, 16 declined and 12 rose. Geneva recovered some of the ground it lost in GFCI 20. Ratings for Amsterdam, Vienna and Gibraltar fell significantly. At the same time the leading financial centres in the Asia/Pacific region rose in the GFCI ratings. Beijing in particular rose significantly and in now within the top twenty centres worldwide. (See chart below)
Furthermore, the study says that in terms of “reputational advantage”, which takes account of global financial professionals’ perceptions of a centre as well their GFCI score, seven of the top ten centres are in the Asia/Pacific region, with Singapore most highly regarded. Toronto, New York and London also put in a strong performance on this measure.
While New York’s performance eased in GFC21 other centres in the USA continued to advance, with Los Angeles notably moving up 20 points into the top 20 global centres. In Canada, Toronto, Montreal and Vancouver all performed well in GFCI 21, with the study authors noting that “financial professionals continue to favour safety and stability in their choices of location”.
Across Eastern Europe, five of the region’s top six centres rose in the ratings. Istanbul was a major exception to this pattern, falling 11 points. Istanbul is now in 66th place in the GFCI having been 45th a year ago. Continuing conflict and political uncertainty is affecting confidence in the Turkish capital, with one Dubai-based asset manager commenting: “Istanbul is really suffering at the moment. Terrorism, proximity to a war zone and an authoritarian president are all viewed badly by the finance industry.”
Elsewhere, financial centres in the Middle East and Africa did well in GFCI 21 while Latin American centres continue to struggle. Sao Paulo, Rio de Janeiro and Panama all fell significantly. Offshore centres had mixed results, with British Crown Dependencies remaining stable as Caribbean centres put in a mixed performance, with the Cayman Islands and the British Virgin Islands falling, but Bermuda and the Bahamas rising slightly.