LONDON (Reuters) – Will Brexit lose London’s position as the largest international financial center?
London has been an important artery for the global flow of money for centuries. The financial services sector accounts for around 12 percent of the UK’s economic output, employs around 1.1 million people and pays more taxes than any other industry.
From its traditional heartland to the cheeky skyscrapers of Canary Wharf and posh Mayfair townhouses, London represents one of the greatest concentrations of financial wealth in the world.
Its only rival, New York, is focused on the American markets, while London has more banks than any other center, dominates markets such as global foreign exchange and commercial insurance, and is home to international bond trading and fund management.
But around a third of the transactions on its stock exchanges and in its trading rooms concern customers in the European Union. These could be at risk after Brexit unless the UK manages to maintain similar access to the trading bloc.
The French finance minister predicts that in a few years Paris will overtake London as Europe’s most important financial center, although EU exit supporters say Britain will benefit in the long term from setting its own rules.
London remained the top spot in the annual Global Financial Centers Index released this week by Z / Yen Partners and the China Development Institute, though the gap between it and New York narrowed to one point on a scale of 1,000 and his in second place Rating rose by less than the other four top centers.
Reuters publishes its second Brexit tracker, which monitors six indicators to assess the fate of the city and regularly checks the pulse of public transport use, bar and restaurant opening times, commercial property prices and jobs.
Almost a year before the UK left the EU, the tracker suggests that London’s financial districts have been withheld, but there is no evidence of mass exodus.
“London has not suffered a fatal blow or anything … However, increasing uncertainty about London’s future has stalled its growth,” Michael Mainelli, executive chairman of Z / Yen, told Reuters.
(Graphic: Brexit and the city – tmsnrt.rs/2zzQOfC)
Jobs leaving London?
Firms that employ the bulk of UK workers in international finance told Reuters that the number of finance jobs they plan to relocate or create abroad due to Brexit has fallen to 5,000 by March 2019, half the number six months.
This comes amid more conciliatory signals from UK Prime Minister Theresa May, while progress in talks with the EU has led some companies to postpone major staff changes.
The results suggest that the first wave of job losses could be at the lower end of early industry estimates, meaning London will maintain its place as the continent’s leading financial center in the short term.
London’s financial industry should weather Brexit largely unscathed, even if thousands of jobs are shifted, says City of London Political Leader Catherine McGuinness, adding that it could take years to fully feel the effects of Brexit.
“All the indications are that companies are just making plans to postpone the minimum required,” she told Reuters, adding that “just because you can’t see massive change happening suddenly doesn’t mean that you can assume that everything is fine.”
The number of vacancies in London’s financial services industry fell the most in six years in 2017, said Morgan McKinley, a recruiting agency that hires in finance.
She is based on the total volume of job search mandates she receives and applies a multiplier based on her market share in the London financial industry.
The recruiter found 82,147 new jobs were created in the financial services sector in the past year, a decrease of 12.45 percent from the previous year. This is the lowest number of job openings since 2011.
“Brexit has slowed job growth. Companies are currently reluctant to make important investment decisions, ”said Hakan Enver, operations director at Morgan McKinley Financial Services, who conducted the survey.
Commercial real estate
Reuters received real estate data from Savills and Knight Frank, two of the UK’s largest real estate companies. Savills calculates the value of all known real estate listings in the Greater London area.
According to Savills, commercial property prices in the City of London are now at their highest level since the third quarter of 2016, three months after the Brexit vote, driven by an increase in office purchases and leases in the final quarter of 2017.
City of London property rental rates rose 9.5 percent in the last three months of the year, rising from £ 71.21 per square foot in the third quarter of 2017 to £ 78 (107) per square foot, Savills says.
“There has been a lot of exaggeration about the fall of the city,” said Philip Pearce, director at Savills. “The post-Brexit expectation was that the world would flow out of the city while the opposite happened.”
In Canary Wharf, too, prices remained unchanged in 2017 compared to the previous year, says Knight Frank, whose data comes from landlords, developers and brokers.
Dive into the ground
Around 400,000 journeys are recorded daily at the three main subway stations that serve City and Canary Wharf.
Reuters has requested the Freedom of Information Act to Transport for London to obtain this data, which shows the number of people using the Bank and Monument stations is heading for the first decline since the last year of the financial crisis .
The number of people entering and leaving Bank and Monument decreased by a fifth in 2017 compared to 2016, the data shows. This follows an annual increase since 2009.
In Canary Wharf, the number of users of the station fell by 10 percent, while the number of users of the London Underground network fell by around 2 percent overall in the past year.
Mike Brown, the commissioner for Transport for London, said it was difficult to explain the drop in passenger numbers.
“Is it an element of economic uncertainty? Are there a handful of jobs here or there that may not be there this year compared to last year, or is it really just that people are working from home? ”He said. “It’s a little difficult to be categorical.”
Canary Wharf owners did not respond to requests for comment.
The number of passengers using London City Airport, a popular gateway for financial managers, fell for the first time since the final year of the 2007-2009 global financial crisis in 2017, publicly available figures show.
The number of passengers at the airport near Canary Wharf’s financial district fell 0.2 percent last year. That compares to an average annual increase of 8.8 percent over the past six years.
London City Airport said the stagnant numbers were partly due to some airlines cutting routes.
“We are very confident about the long-term future prospects of London City Airport and UK aviation as passenger growth is expected to pick up again in 2018,” a spokesman said.
Bar and restaurant openings
Reuters has filed with the City of London Corporation under the Freedom of Information Act to determine the number of new premises that have applied for licenses to sell alcohol and license renewals.
The number of places such as bars and restaurants licensed to sell alcohol in the City of London fell 1.6 percent in 2017, data from the local authority shows.
The number of venues applying for new licenses remained unchanged from 2016, the data shows, although the City of London Corporation declared such fluctuations to be normal.
“As some facilities close and others open, it is inevitable that the number of license renewals will fall and rise, but overall the number of licensed premises in the city has steadily increased in recent years,” a statement said in a statement.
($ 1 = 0.7278 pounds)
Reporting by Andrew MacAskill; Editing by Alexander Smith