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The City of London has cemented its dominance in international finance ten years on from the Brexit vote but faced sobering domestic growth that failed to match the momentum.
The capital sees more international activity conducted than the next eight largest financial centres in Europe combined, according to a new report by New Financial.
The UK was given an overall score of 54 by the think tank, which grades hubs on the dollar value of market activity they attract compared to the largest player on earth, the US.
London’s rating towers above the combined value of Germany (13), Luxembourg (9), France (9), Netherlands (7), Ireland (5), Switzerland (5), Spain (3) and Sweden (3).
The figures come ten years after Britain’s vote to leave the European Union shocked markets and sparked fears of a financial services exodus.
Fears emerged that a fleet of well-paid City jobs would move over to hotspots across the 27-state bloc. Whilst Wall Street’s top banks have added around 11,000 employees to their EU branches post-Brexit to comply with European regulatory requirements, the City has continued to flourish.
The total number of jobs in London’s booming financial hub has ballooned to some 675,000 from around 500,000 previously, according to data from the Office for National Statistics.
International market activity in the UK grew by 20 per cent in the last ten years, surpassing the global average of 17 per cent.
But on the domestic front growth was a sluggish three per cent – far below the average 18 per cent – revealing a stark divide between the City’s global appeal and the reality of its domestic economy.
Domestic performance ‘not good news for UK’
New Financial warned the City’s dominant international display was “much more significant than its domestic role in financing the British economy”.
Compared to its mammoth international finance score, the City scored a mere nine for its domestic financial activity, putting it in fourth place globally.
“This is not good news given the UK’s need to boost economic growth and close its significant investment gaps,” the report said.
The domestic side of the index measures market activity that is tied to one destination such as banks lending money to local companies or funding infrastructure.
The UK scored six out of 100 for funded pension assets tied to domestic growth with around three per cent of pension fund money in British stocks, compared to 50 per cent 25 years ago.
The nation’s broader business environment conditions was also found to have worsened in 10 out of 15 metrics in the decade, with the report specifically pointing to tax competitiveness and quality of infrastructure.
The New Financial report positions the UK as the single-most international financial centre, with cross-border financial flows accounting for 56 per cent of all its measured financial activity.
That places it above other major hubs including Hong Kong (50 per cent), Luxembourg (45 per cent), Singapore (31 per cent), and the United States (26 per cent).
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