The UK has held its place as Europe’s top financial centre, but Asian hubs are catching up fast, according to a new report from the New Financial think-tank.
New Financial’s ranking, which places the UK in a stronger position than other analyses due to its reliance on the value of activity rather than qualitative metrics, puts the UK’s financial markets at three times the size of France’s or Germany’s.
While the UK scores poorly in terms of the size of its domestic market, coming in lower than Japan, this is offset by its strengths in international banking and finance, the report says.
London is particularly dominant in trading and clearing; it is by far the biggest market globally for foreign exchange and derivatives trading, and the second biggest market for clearing and foreign equity trading, the think-tank finds.
Since the Brexit referendum, domestic activity growth in the UK has averaged 0% across the 21 metrics used in the report, compared with 14% across the European Union. Yet international activity growth in the UK outstripped the EU’s by 19% to 14%.
Because of the metrics used, the UK also gets a hammering from the US, which comes out higher than most other reports, with financial activity volumes that are more than twice the size of the UK’s.
The UK is also losing market share to financial centres in Asia, a region major banks are increasingly targeting; international activity increased in both Hong Kong and Singapore by more than 50%.
The think-tank says that it is too soon to draw definitive readings from Brexit however since the figures could be used to support both sides of the debate; Brexit voters could see the continued solid lead over EU rivals as proof of their case, while leavers could also contend that domestic activity stagnation as a sign of Brexit weakness.
William Wright, founder and managing director of New Financial, said it is too early to measure the full impact of Brexit but this index underlines how dominant the UK as an international financial centre in Europe.
“While that lead has already been dented in some sectors – such as foreign equity trading, foreign bank assets, and financial services exports – there is no evidence yet that Brexit will lead to the any financial centre in the EU coming anywhere close to London’s position as an international financial centre anytime soon. This index will enable us to measure the full impact of Brexit in a few years’ time,” Wright said.
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