EU regulation may hurt London biz
London has lost its crown as the world's leading financial center. It now shares the top spot with New York. Stephen Beard reports taxes and regulation are to blame.
The clock on the Royal Exchange building shows midday in front of the Bank of England in London. (Peter Macdiarmid/Getty Images)
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KAI RYSSDAL:London's main stock index, the FTSE, lost two tenths percent today. But, really, who cares? A survey out today called the "Global Financial Centers Index" shows the British capital is no longer the world's leading financial center. New York shares the top spot.
So we asked Marketplace's Stephen Beard, what the heck happened?
Stephen Beard: London's finance industry has been called the "jewel in the crown of the British economy" -- a major employer, exporter and source of tax revenue. So today's news has come as a shock.
Rob McIvor: Well, it's a bit of a jolt. We've been very used to being the top dog, financially, for about the last 300 years.
Rob McIvor of the Association for Financial Markets says there's no doubt why London's been losing its appeal.
McIvor: The big point that comes through from the findings of the research is actually that people are concerned about the tax and regulatory environment in London.
The British government has hiked the top rate of income tax to 50 percent and slapped a 50 percent tax on all bankers' bonuses. The banks are threatened with much tougher regulation and not just from the U.K. authorities.
Stuart Frazer is head of policy for the London financial center, the City as it's known.
Stuart Frazer: We've got the added layer of European regulation, which could well affect the competitiveness of the City.
The European Union's planning new rules to curb private equity and hedge funds. And there's even talk of banning some of the financial products used to speculate against Greek government debt.
Frazer: We have extra layers of possible restraint, which New York doesn't have.
But a U.S. crackdown is also planned, and while London has stumbled, New York isn't flourishing. According to the Global Financial Centers Index, it is merely holding its own -- while Asian financial centers, are growing fast.
Economist Andrew Hilton.
Andrew Hilton: There's nothing, nothing that New York or London or western Europe can do to keep that business if indeed people really want to go for the Asian dollar.
And they do. In this years' Index, Hong Kong surpassed both London and New York as the top place for insurance.
In London, this is Stephen Beard for Marketplace.
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