London (Barely) Retains Crown As Top Financial Hub

London may be on the cusp of falling down from its post as top financial center of the planet, finds a new report.

The Z/Yen Global Financial Centers Index (GFCI), released last week, retained London’s top spot but uncovered widespread feelings of uncertainty among financial professionals, especially as concerns over potential fallouts from Brexit continue. The report’s ranking of 88 financial hubs placed London at the top, followed by New York City and three Asian cities: Singapore, Hong Kong and Tokyo.

But despite London’s continuing reign, analysts identified significant concern over its future position.

“Brexit is a major source of uncertainty for all centers — not just London,” said the Z/Yen GFCI’s authors.

“London slipping is not to the benefit of continental Europe,” said Z/Yen Group Director Michael Mainelli. “That is largely due to perceptions of Europe. The notion that we are a tired old continent is raised quite a bit.”

London’s ratings among financial professionals surveyed, which reflect reputation and business climate, have significantly fallen in the index since September, when ratings were last gauged. Reports said those ratings have likely fallen even further still, since the index was released before U.K. Prime Minister Theresa May stated in January that the country would leave the single European market and begin Brexit proceedings.

Negotiations will begin later this week (on Wednesday, March 29) for the U.K. to officially exit the European Union. Brexit has continued to cause widespread concern among financial professionals as the ability for London to remain a primary point for dealings across Europe is now in doubt.

The election of Donald Trump as president in the U.S. similarly hurt New York’s ratings.

“We live in uncertain times, and financial professionals hate uncertainty,” said Z/Yen associate director Mark Yeandle. “Brexit has caused uncertainty in Europe, and the election of Donald Trump has caused uncertainty globally.”

Another survey released recently, the Currency Risk Outlook Survey by AFEX, similarly found Brexit and Trump’s election to have injected significant levels of uncertainty among the financial services world.

“The shock ‘Brexit’ result in the U.K. last summer and Donald Trump’s presidential victory in the States has altered the focus of the markets from economic data to shock political events. Markets are being driven more on sentiment and less on economic data — and the global rise in right-wing politics has greatly increased global political uncertainty,” Robert Bolle, regional manager at AFEX, told PYMNTS in a recent interview.

In that survey, 56 percent of the 650 financial professionals surveyed said they anticipate an increase in currency volatility over the next year. Nearly a third said they see this volatility as their top challenge to manage risks.

“Historic trade agreements between developed economies are being put into question more than ever before — not least with the U.K.’s long integration with the European Union ready to get dismantled and reorganized,” Bolle said. “One decade ago, key market data (such as non-farm payroll reports, inflation and GDP data) drove the currency markets. Today, political and economic uncertainty is the main driver behind very significant market volatility.”

With London’s position as the global financial epicenter in doubt, analysts are looking at other European cities that bankers may use to establish new trading hub; according to reports, Frankfurt and Dublin are top contenders, which were ranked twenty-third and thirty-third, respectively, in the Z/Yen report. Earlier analysis has also identified Berlin as a contender, with the city’s Senator for Economics, Technology and Research, Cornelia Yzer, saying last year that “Berlin will exploit the opportunity provided by Brexit.”

“These companies need to be in the heart of Europe,” Yzer continued, “and where is better than the capital of Europe’s strongest economy?”

But with London retaining its post as number one in the Z/Yen index, the city will continue to fight to keep its title.

“London is (still) the best place in Europe to launch a global tech company,” said Skype founder Niklas Zennström, who is among several signatories of a letter sent to PM May late last year voicing concerns over the future of London and its position in the financial world. “What the U.K. government needs to make sure is that technology companies still have access to the best talent in the world. If (that happens) without a lot of red tape, we are going to be fine.”