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Each week we dive into a story that's crucial to the world's financial capitals. I'm David Merritt, and this week we are actually recording from New York City, but our story is London itself and how it's doing in the ever present battle for supremacy as the world's financial capital. We've been looking at the latest ZN Global Financial Centers Index and it's got you know, what you could argue is perhaps a surprising result. It shows that London is closing the gap with New York for the title of
the world's top financial center. This is the thirty seventh edition of the Global Financial Centers Index and it showed London in second place, but it had climbed twelve points since September. London is well ahead of the pack in terms of the European rankings. It's got a nineteen point lead over Frankfurt, which isn't even in the top ten, and London was in the top three categories for eight major financial industries and was the first for banking and in fintech. It cut the gap with New York to
a single point. So a subject we've covered on this podcast over the years, a lot of all the uncertainty of Brexit, all the head winds the UK's faced, the city seems to be thriving.
So how has it pulled it off?
Well?
To talk about this, I'm delighted to be joined by Chris Hayward, the Policy Chairman of the City of London Corporation.
Chris is the principal.
Spokesperson and advocate for London's global financial and professional services industry, and with the career spanning over four decades, has founded, led and expanded businesses across industries ranging from aviation, publishing and construction, both in the UK and around the world.
Great to have you here, Chris.
Fantastic to be here, David, and you know.
So you're on a visit to New York as well.
They like to have these banners on the lamp posts around here, don't they saying the world's financial capital.
Are you here to sort of disrupt that absolutely.
I mean I won't rest until the City of London is number one, and it's always close between us and New York. But frankly, you made the point that we see to be doing rather well. I think we're in a renaissance period actually the city.
At the moment.
We're finding that we can't actually build tall office toiles fast enough to cope with the investment and development needs of big businesses around the world, and our vag rates in those offices are down to one point two percent, which is remarkable. Frankly when you think about it. Now, what's been happening well past ten years. I've had people telling me, well, London's moving east, everything's going to Canary Wharf, everything's going further to New em et cetera.
Well it's now coming back.
Just done the deal with HSBC to move them back into the city. That's eight and a half thousand new jobs. We've done a deal with Clifford Chance, the big global lawyers, to build new offices for them, and there are others in the pipeline. And then we're finding it's coming the other way as well, from the West Ends. So some of the hedge funds who have traditionally been in Mayfair are saying can they come into the city, So we are really really expanding.
Maybe I rashly said it's a surprise, because obviously it doesn't seem like it's a surprise to you that we've got at the rank. Maybe we've over agonized and this podcast being a venue for that about the rise of Paris.
For instance, for Europe.
Whatever happened to Paris is eating London's lunch.
Well, look it hasn't happened. It's a simple thing.
I mean, the city of London has proved itself totally resilient in the wake of Berexit. I mean, it's been a long and painful divorce of h years. It's been very, very tricky and my fear, i'd be absolutely honest with you eight years ago, was that we would lose huge numbers of jobs to Europe, particularly in passporting. Now the reality is in the financial services sector that I speak for, it's a total of seven thousand jobs across the whole
of the United Kingdom. And of course new jobs have been created on the back of European companies who now say, well, because you're out of the EU, we need to open up in the city. We need to put our back offices in the city as well. So overall we've proven ourselves resilient to the Brexit challenge.
We've got a big EU UK summit coming up or a kind of this chance for Starmer. He's talking about resetting with the EU, so presumably things might get easier. I mean, I guess the fear was we were going to try to diverge. The EU could play a bit more hard ball and they could have made things harder for us in the agents they could and you know, let's face it, the French you wouldn't blame and want a bit of that business. They want a bit of
that traders and investors to come to Paris. But do you feel like we're in a bit more an equilibrium that Europe needs ass We need them, but we've got the balance right.
Look, I think that's true. And I mean, actually, when you talk about the reset, I think we've got to manage expectations around the reset because there is no backdoor route back into the EU, even if we wanted one. So we've got to be realistic about how much can be achieved by the reset. But what we need to do is to start being able to talk to each other and work with each other once again, and we haven't done that for eight years.
It's been very, very tough.
But now we've got our Financial Services dialogue up and going again with the European Commision, so that means our Treasury are talking to them and discussing with them, and Europe I think has now accepted that where we are is that we want to be. We want to be good friends and neighbors with them because they are critically important to us. There are closest trading nation and it's in our interests, frankly to work together, particularly things like regulation.
There are so many areas around you know, AI, around a grand Green finance, and all sorts of areas in financial services where we need to work together. But I do think the other area where we will find that there is a restructuring of the relationship is around defense, because we now know that the President of the United States has told Europe probably rightly, that we now need
to put money in ourselves as well. We're not going to be able to rely on the US to completely as subsidize as it were, and so every nation state in Europe has got to work together on that, as they have on things like, you know, a solution to the Russia, the Russia invasion of Ukraine.
There was an argument was in there I remember from the Europe well, the sort of pro Brexit cant was saying that, you know, Europe can't just cut itself off for the city of London. It's going to increase the cost of capital for European companies. They're going to harm their own economy. But I guess the temperature was so hot at one point I was like, well, they are going to do it anyway.
Yeah, it was just too red hot frankly, but it's calmed down a lot, and it is in the interests of both parties to work together and to set that we are outside of Europe. But the reality is if you think of all the European banks, right, they may well do their domestic banking in their countries, but when it comes to international banking, it's all done through London. So London will remain and has remained a hub.
I mentioned in the survey.
It's across those all those different metrics that kind of number one in banking. I mean, what are the area and fintech nipping at the heels of New York City, which is something that obviously the city has been very keen to position itself as a world leader. What are the kind of the hour there are is where we need to do a bit better.
Fintech we have done really well, although let's not go over the top on it. I mean we're very good at startups, we're not so good at scale ups. You made reference earlier, David, to the issues with the listings, right, Yes, well precisely so. Listings. Look, listings are down, IPOs are
down all over the world. But there's no doubt that our high growth British businesses of which FinTechs are a good example, when it comes to listing often will come a list on Nasdaq rather than on the London Stock Exchange. Why because they can get valuation that's two and a half times what they get in the United Kingdom, and they can also of course get the increased capital from
the US and we need to address that. One of the ways we're addressing it is something called the Mansion House Compact, which is where we've signed up eleven big pension providers who said they will contribute five percent of DC pensions to a pot to a fund which ultimately will build around fifty billion pounds and that will be invested in high growth British businesses and I think that's
terribly important. Obviously, the US Stock Exchange, New York Stock Exchange has become a challenge for US that in that area, but it's an area where I think we can continue to do more.
Do you think the events of the last few weeks have changed it a bit? I mean, if you are so, you know, you're a fintech company with you know who can remain name is you're thinking maybe you're headquarters in London. You may have been thinking about in New York. You look at the volatility that's been occurring in the United States market and the cical uncertainty and all the question about tariffs and even visas and all these questions.
Do you think again are they thinking again?
Well, look, let's be clear about the tariffs. We don't welcome tariffs. I mean, that's a fundamental statement to make at the start. On the other hand, the United Kingdom has let's just say, got away with it reasonably ten percent actually has no tariffs on services.
That's very welcome.
And I do think I know we always play on this words the special relationship. But I do think there is a special relationship between the United Kingdom and the United States. But America at the moment is volatile. It's politics is volatile. On the other hand, Europe is also overregulated and is actually not experiencing growth. And the one thing we've got to do in the United Kingdom is to grow the economy, and this is what the UK government has said, and that means we've got to start
thinking outside the box on things like risk. So what I think is very good in America is that you know where entrepreneurs fail, you pick them up, dust them down, put them out there again. Unfortunately, we need more of that culture of the United Kingdom. At the moment, you're
a bit of a pariah if your business fails. So what I'm saying to the Chancellor and to the government is we need to encourage what I call responsible risk taking because since the financial crash, we more or less lost that and you will never get economic growth if there's not an element of risk.
Right, And I was hoping this on Wednesday in New York we had a negative GDP print this morning for the first quarter, which from forecasts of much more positively. Only weeks ago people are talking about the probability of recession here. Britain's not going to escape the sort of down to her that that would induce, is it now?
It's not.
Unfortunately, if that happens, the chances are Britain would end up following the same route.
I'm afraid the difference.
I guess Rachel Reeves's position is difficult and precarious, isn't it. There was a lot of talk before the election about how friendly she was going to be the city, and what I think our reporting has shown since then is that people feel that she hasn't stood up those promises.
How does how what's your scorecard for Rachel Reeves? Well?
Look so well?
I wish I should give her an actual number out of ten, because that's not my job. But what I would say is this, she hasn't got a lot of head room. You're quite right now. She will argue and did argue when she came in there was this big black hole.
A lot about that, But.
To be honest, every government does that when they come in. There's always a big black hole left by the last government. We've said to her that we need to have a globally competitive tax system, which we haven't got at the moment. She knows that that's something that she's got to achieve. We've also given her some advice around something we call Vision to Economic Growth, which is a piece of work I commissioned a couple of years ago which came out
with ideas as to how you get that growth. And I'm very pleased to be able to tell you that one of those ideas is that we increase our foreign direct investments and we've agreed with the Treasury and with the Chancellor that we the City of London Corporation will partner with them to develop an investment hub, a concierge service, if you will, because it's my belief we've slipped behind our global competitors in the area and direct investments, and we don't make it very easy for people to invest
in the United Kingdom right, it's actually a challenge. You actually have to work quite hard to do it. What we've said to the other story, if they did they did a global investment summit within their first few weeks and they hosted did a Guildhall global headquarters.
Well it was a bit quick, I think in a way.
What did you do before the budget didn't they.
Did, and there was the uncertainty. But what I do believe is that the Rachel Reeves genuinely believes that economic growth is the only way out of the crisis. That you cannot spend more on public services if you don't create growth and increased wealth. And therefore, what we've got to do, I think all of us in the City of London Corporation and in the sector that we represent, is try and keep a focused around policies that will drive that growth. Now, growth doesn't come overnight. Let's be
absolutely clear. You can't waive a magic wand and create economic growth. But we've had no economic growth or precious little in the United Kingdom for the past fifteen sixteen years, whilst look at the growth that you've had here in the United States. It's been remarkable, frankly, and I think that's also about culture. It's also about how you get the regulators, the financial regulators, to contribute towards making us
globally competitive. So regulation is important. Proportionate regulation is we don't want to race to the bottom, and that's one of the things i'd like to see the government act on.
Is there a risk in that you might want us to divert it a little bit too much from the from the European norms on this, I mean, how do we try that back alone? It make that sounds a little bit more risk, a.
Little bit more time.
Yes, risk happitite No, No, not severing ties with Europe.
No, I don't want to semitize with with Europe. Just the obsellant to build on that relationship. But let's be blunt. We're out of Europe now. We don't have to do what Europe does right. We are an independent nation and that allows us the flexibility to look at our own regulations and decide what's the best route forward for us. And I do think we need to diverge a bit. I do think we need to take a bigger, a better approach to risk. It's very important that we do.
But it should be responsible risk taking, not rash risk taking. But we have to recognize that part of the economy, part of an ecoding cyclists that businesses will fail as well as succeed.
Do you have alignment on that point.
Do you think with the regulators that we've gone in the position at the moment in Britain, or is there a divergence of views on that point.
Look, I think you've got to except, first of all, the regulators are independent. Secondly, regulators do what says on the tin. They regulate right, and I think they have been very nervous because they know that if things go wrong, they're summoned in front of a select committee of the House of Commons, They're hauled over the coals and Todd, you weren't doing your job as a regulator. Why has
this business failed, Why is this person's pension gone? And therefore what we've got to do is give them some protection, to allow them to feel more confident, to lighten up a bit and allow some risk to come through.
Chris, I just want to go back to what you said at the beginning about the building and the vacancy raids. I think you know next time you come on the podcast, we will do it in our London headquarters, right in the middle of the City of London, by the Bank of England. The skyline in the city keeps on evolving, changing, keeps growing more high rises. Can you give us a flavor of where you see the next few years going.
If this demand continues, are we going to see that more mustering skyscrapers in this in the square mile.
Is it going to continue to grow?
Look, I think the answer to that is yes. I mean the way that I lead the City of London Corporation is to treat it like a business. If it isn't growing, it's falling back. You cannot stand still against global competition, right, So, whether it's up against New York, whether it's up against any other city, we have to
keep growing. When I first took on this role, it was immediately in the aftermath of COVID, and the first thing that concerned me most was was the SMEs, because our SMEs had been obliterated, the little coffee shops, the sandwich stores, et cetera. And I said, what we need is new football and new spend. And so I launched a flagship policy called Destination City, which is all about
reimagining the city. And now we've got a city with a vibrant nighttime economy, with a really strong retail offering. We've got workers who Demo Graphic is much younger than we've ever had before, and they want to work and play in the same place. When I first came into the city thirty five years ago, the pubs closed at seven or eight o'clock in the evening. You had to go to the West End if you wanted a night life.
It is actually heaving on the streets Thursday night.
Thursday is the old Priday.
There's more places to there's more, there is great places three right, it's great place.
It's fantastic restaurants, great bars.
In the Bloomberg Arcade, in the Bloomberg Arcade, particularly in the Bloomberg Arcade number one, number one, and the city is very, very different to what it was twenty thirty years ago. Now do I see this continuing to happen, Well, it certainly will if I have anything to do with it, because I believe that you have to continue to grow, to evolve, and that the way to do that is to make your city the most attractive place for businesses to invest and want to be there.
Chris has been a pleasure having you on the podcast.
Thank you very much, David, thanks for listening to this in the City from Bloomberg. This episode was hosted by me David Merritt. It was produced by Summer Sardi, Moses and Am and tala Amadi, Brendan Francis, Newnham, is our executive producer special thanks to Chris Hayward. Please subscribe, rate, and review wherever you listen to podcasts.