How The UK Lost Its Place As The Global Financial Hub?

How the UK became the financial capital of the world?

The U.K. is the biggest net exporter of banking and financial services and London, with its suitable time zone, use of the top spoken global language across the world - English, as well as convenient business regulations, helps it in being called the world’s financial capital. Different other cities like Venice and Amsterdam, could not have held the title of world’s financial capital consistently, now the same is being said about London, will it be able to keep the title amid the Brexit and the conceivable loss of passporting privileges of firms operating in Britain, which have put a question mark whether the city can keep its position at the core of worldwide fiscal framework.

With more than 8,000,000 inhabitants, around 40 colleges and several worldwide organisations headquartered in London, it is the world’s financial capital that had appealed the world’s biggest companies for quite a long time.

A few additional reasons why the city has been called the world’s financial capital:

• Various top Banks are based here – London is the home to some of the biggest commercial, merchant and investment banks in the world that includes the likes of HSBC Holdings, Royal Bank of Scotland, Barclays as well as all the brands of the Lloyd Banking Group, that have helped and supported individuals as well industries and commercial enterprises not just based in the United Kingdom, but industries across the world.
• A global transport hub - With the city limits spreading outwards and the development of air travel, it turned out to be clear there was a requirement for air terminals. In the twentieth century, three significant air terminals opened their entryways, with Heathrow, Gatwick and London Stansted giving quick and simple worldwide travel. It is air travel that has especially caught the creative mind of organisations, with CEOs of worldwide organisations and their customers boarding private flights to reach London for their business meetings easily. Organisations, for example, Vista jet can get their business heads to any destinations across the world, empowering a smooth method to work together in the capital.
• Culturally popular city – London is one of the most popular cities for tourists and locals alike, primarily because of its extreme mix of modern as well as traditional culture, which also makes it one of the most popular cities for people to work in, which allows the businesses to thrive in this city.

How London Lost its spot as the Global Financial Hub?

In a survey conducted by one of the major news sources, it has been reported that London has lost its top spot as the global financial hub to New York, United States of America. It was reported that London suffered a 19 percentage point decline with only 33 per cent of the c-suite executives suggesting that they would choose London as a city to put their capital into, down from 53 per cent as per a similar survey conducted in the year 2018. Approximately 56 per cent of these executives mentioned that they would consider New York to be the world’s pre-eminent financial hub which was an increase of 42 per cent in 2018.

The principal reasons for this kind of a decline that are being suggested from the top authorities are the uncertainties that have been created in the environment due to the fears of United Kingdom’s exit from the European Union or Brexit. Another major factor that has been called out is the global economic worries, such as the trade conflict between United States and China as well as the potential mega conflict between the United States and the European Union, each of whom have threatened the other with economic sanctions, such as increase in tariffs for the products being imported from the other party.

London has been hit by a major thunderstorm, with some of the biggest retail companies failing to perform in the United Kingdom in the last couple of years, with most of them having to close down their high street stores, causing a major loss of jobs, adding to the already heightened chaos and mayhem that has existed in the market, since the Brexit referendum was first conducted in the year of 2016. The situation turned so bad, that the outlook for the country from some of the biggest analysts, came crashing down, which led to some of the biggest companies, who were once potentially interested in starting or expanding their operations in London, withdrew from doing so. Just take an example of the automobile giant Tesla, the company which was supposed to start building a Gigafactory for the production of batteries and electric cars in the United Kingdom, but at the eleventh hour, withdrew and went to China, primarily because of the low labour as well as land costs.

Impact of this on the Existing UK businesses

As per a research conducted by one of the major research and insolvency firms in the country, it was reported that around 500,000 UK businesses were in significant financial distress and a red alert has been raised for the regulatory bodies to take a quick action for the revival. Data from the research firm resulted in the conclusion of the fact that companies operating outside of the London Metropolitan, area in particular, had displayed massive red flags around their financial difficulties, raising further questions for Boris Johnson’s administration, as the government was still in conversations regarding the levelling up of growth in these areas. Although almost 126,000 London businesses have displayed cautionary signs of significant distress, according to the outcome of the research and its interpretation from different media sources, more than 358,000 businesses in other UK areas were battling financial distress.

Outlook for the economic Environment post Brexit

The current indication from any deal that has been negotiated with the authorities from Brussels by Britain’s government, is making it seem like everything will be fine post Brexit, primarily due to the fact that United Kingdom’s focus remains in making single market agreements with foreign governments around trade, the businesses are still in the midst of gauging the kind of impact, such a situation would lead to. Hence, currently, the skies for business environment in the UK seem blurry, and this continues to be the case unless and until details of the agreements being made by the British government are out in public. Hence, it is expected that the uncertainty will persist at least for some time more post Brexit, which could lead to further degradation of the economic and the business environment of the country in the near term.