UK firms bank on London’s status as top financial centre
More than two thirds of the UK’s financial firms believe that London will retain its status as one of the world’s leading financial centres after Brexit.
When Britain completed its exit from the EU in December last year, it divorced from its biggest single export customer, casting doubts over its status as a leading global financial hub.
But city firms were bullish about the future of their business in the UK, according to an annual sentiment survey of more than 100 banks, asset managers and insurers conducted by Lloyds Bank.
Just under a third (32 per cent) said they believed the competitiveness of their own sector would improve over the next year – almost double the 17 per cent of firms who thought it would worsen.
Changes in the regulation that governs the sector post-Brexit was the main sticking point for City firms: almost half (48 per cent) of the firms that believed the UK’s competitiveness would improve in the next year cited regulation diverging from the EU model as the key factor.
But at the other end of the spectrum, three quarters (78 per cent) of the firms that were more pessimistic about the UK’s competitiveness cited regulation as a commanding factor.
“This year’s survey emphasises the belief in London as a global centre for trade and finance as firms anticipate and adapt to the new regulatory environment,” said Adrian Walkling, head of financial services at Lloyds Bank Commercial Banking.
Confidence improving
Compared to the same time last year, the firms surveyed by Lloyds were significantly more confident about the growth of the British economy and the UK financial sector’s prospects.
The vast majority (88 per cent) expected British economic growth to improve over the next year, up from just a fifth (20 per cent) in 2020, while 32 per cent believed the UK will achieve stronger growth than other G7 nations, up from just 7 per cent last year.
And when it comes to the UK financial services sector, just over half (55 per cent) expected growth to improve over the next year, up significantly from 13 per cent last year. This confidence spread to individual business outlook, as 65 per cent expected their revenues to rise compared to 31 per cent in 2020.
Divided opinion
It comes just a week after the Square Mile’s most influential lobbying body, TheCityUK, warned that London is at risk of losing its status as a global financial powerhouse within five years, and set out international strategy proposals to help return the UK to having the “world’s leading financial centre”.
A vastly changing international economic landscape is chief amongst the reasons that the UK has seen a decline relative to its global competitors such as New York and Hong Kong over the past decade, according to TheCityUK.
Despite the UK’s growing size and volume of many market segments, it has paled in significance compared to the rapid growth of new financial centres in Asia and continued growth in the US.
“Europe is littered with cities that were once the leading international centre of their day,” Miles Celic, chief executive of TheCityUK, who called for the government to do more so that the London avoids the same fate.
“The last decade has been one of growth for our industry, yet global competitors have grown faster.”