Did the London Financial Center Really Lose Its Luster?
By Angela S. Santos

In March 2011, The Economist asked its online readers if London was losing its financial centre's appeal. 58 percent said yes. The Centre for Economics and Business Research (CEBR) recently showed that in 2012, for the first time, London fell from its top spot as the world's largest financial centre by the number of jobs. London's financial services jobs were estimated to be lower than New York's 254,102 for 2012. By 2016, London will lose out to both New York and Hong Kong. Nevertheless, based on The Banker's 2012 global asset management survey, London managed to beat Hong Kong and New York to be the most attractive operational centre for global asset management.

Where did the threat to London's financial centre come from?

London has long held its place as a hub for global money flow and deals. Since the 2008 global financial crisis, London has lost a fair share of the high-paying finance jobs. But the bailout costs for banks have hurt the rest of the nation, tipping the UK into a recession. Excessive risk-taking and financial misdeeds have been rampant, with London-based rogue traders causing billions of losses to firms such as AIG, UBS, and JP Morgan. The manipulation of the LIBOR rate also started with some of Britain's oldest and largest banks. Recently, David Cameron's government wanted to impose a temporary wealth tax on Britain's riches to make sure they can help to reduce the deficit. Based on the Glasgow Media Group, the richest 10 percent in the UK own almost 45 percent of the total country's wealth of 9,000 billion pounds. The wealth tax imposition will likely drive the talents away from the UK. The rise in risk-taking mentioned before suggests that regulations may have been too lax in the UK. Mervyn King,
the Bank of England Governor, not only has tightened regulations on the banks recently but also has been working on a proposal to separate trading from deposit-taking functions in the banks. Both London-based HSBC and The Standard Chartered Bank, which have been doing most of their businesses in Asia, have considered moving their headquarters out of London. As a precursor, Standard Chartered has already built the largest trading floor in Asia with about 4000 dealers in Singapore in 2011.

London still has numerous advantages

Despite some of the problems that London has faced, and the rising status of financial centres in Singapore, Dubai and China, London still has many advantages. First, London is in an ideal time zone overlapping with both Hong Kong and New York. London also is Europe's dominant financial hub and a centre of global funds management. It has built up a strong infrastructure in the financial industry on legal, accounting, consulting, trading and fund management expertise. Beijing's CIC, the Korean and the Malaysian sovereign wealth funds' ongoing competition for the 800 million pound-London office campus of Blackstone proves that London has not yet lost its financial centre luster.

To keep its financial centre status, the UK government should acknowledge the rising competition, and devise policies to attract more Asians into keeping and moving their wealth to London.

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