London has once again topped the list of financial centres in the Global Financial Centres Index, a ranking of the top 75 cities in which to do business. The ninth edition of the twice-yearly Index, published by think tank, Z/Yen, puts London ahead of New York, in second place, and Hong Kong, third, across all of its five key areas of competiveness: people, business, environment, market access, infrastructure and general competiveness. According to the study, however: ‘there remains no significant difference between London, New York and Hong Kong… respondents continue to believe that these centres work together for mutual benefit.’ The results are based on a survey of financial services professionals, who report an overall drop in confidence.
Behind the traditional top three, the positions at the top of the index are increasingly being taken up by other Asian cities. In the first report in March 2007 there were only three Asian cities in the top 20. Four years later there are eight (North America has six, Europe five). Moreover, the cities thought to become more significant over the next few years were all Asian: Shanghai, Singapore, Seoul, Hong Kong and Beijing.
But there are also movements within this group. Seoul enjoyed the largest jump in the index, moving into 16th place. Despite the rising tensions between North and South Korea, the report attributes Seoul’s rise to the city’s promotion as a financial centre. Singapore, however, dropped points compared to last year, although it comfortably held on to fourth position behind Hong Kong and ahead of Shanghai.
At number 28, Dubai continues to be the top financial centre in the Middle East, two places higher than Qatar, which is reported to be quickly closing the gap. Bahrain (49) and Riyadh (70) are still a long way behind. The Channel Islands of Jersey (23) and Guernsey (27), the top ranked offshore tax havens, continue a falling trend by this group down the index. Dublin, the Irish capital, saw the second largest points fall after Malta, dropping to number 33 in the index.
But London should not rest on its laurels, warns the report. Curbs on bankers’ bonuses and a ‘profit tax’ on banks are the top threats to the UK capital’s continuing supremacy, a concern highlighted by a YouGov poll cited by the report, which suggests 43 per cent of respondents have considered leaving London and 11 per cent are either definitely departing or likely to do so soon. Summarizing these concerns in the report, Sir Michael Snyder, chairman of the UK government’s Professional and Business Services Group, says: ‘Uncertainty over tax and regulation is a major concern to financial institutions based in London or indeed those contemplating being here.’
The next UK budget is due on Wednesday and it is expected to go some way toward meeting Sir Michael’s call for ‘clarity and certainty on taxation’. As part of his annual financial and economic statement to Parliament, UK Chancellor, George Osborne, is expected to announce a clarification of the taxation of companies’ overseas profits – a move to encourage tax-exiled companies to come back to the UK. It is rumoured that the advertising giant, WPP, will announce its return to the UK to coincide with the budget. The company, headquartered in London and tax-resident in Ireland, is headed by Martin Sorrell, a member of prime minister David Cameron’s business advisory panel. Other companies who have left the UK in recent years include Informa, Shire, Regus and United Business Media.