Newsmakers: Financial Turmoil Hits London’s Status

United Kingdom

By Anita Hawser


Jenkins: London faces threat from multiple emerging market centers

As economic power increasingly shifts toward the East and regulators in the West look to rein in the growth of their financial sectors, senior business figures’ perceptions of what will be the key financial centers in a decade are also shifting. According to UK law firm Eversheds, increasingly US clients of the firm are opting to go direct to continental Europe rather than using London as a financial gateway.

Sharon Shi, head of China for Eversheds, says a number of Chinese companies are also bypassing London to list on Germany’s Deutsche Börse, which has actively courted Chinese IPOs. According to China Daily, 15 mainland companies have listed on the German exchange, and another five or so are expected this year. “Deutsche Börse is reaping some of the benefits from the concerted efforts by successive German governments to exploit the Chinese market in a way London hasn’t done,” says Alan Jenkins, chairman of Eversheds.

But it is not only European centers that London has to fear. In a survey Eversheds conducted late last year of 600 senior business decision-makers across five economic centers—London, Mumbai, New York, Shanghai and the United Arab Emirates (UAE)—87% of respondents indicated that traditional financial centers such as London face increasing competition from emerging financial centers. While New York is likely to remain the most significant financial center in 10 years’ time, say approximately 40% of respondents, London could be battling it out for second place with Shanghai. In a decade’s time, only 17% believe that London is likely to be the number-one financial center, compared to 22% that put their money on Shanghai.

Other potential emerging financial centers include Dubai, although Jenkins believes its handling of the Dubai World debt restructuring has not helped its global standing. Another emerging financial center is Mumbai, with 11% of respondents in Eversheds’ survey indicating that it will be the number-one center in 10 years time. “Mumbai has an enormous domestic market that is growing rapidly,” says Jenkins, “and with Dubai being knocked off its perch, Mumbai has a good chance. It is three hours’ flying time from the Gulf and has a growing youthful and entrepreneurial population.”