Has the City of London finally got its mojo back?
After a dismal few years, things are looking up for Britain’s financial-services sector
Nearly ten years ago, soon after Britons had voted to leave the European Union, the boss of the London Stock Exchange outlined the catastrophe threatening their country’s financial-services industry. If Brexit cost the City of London its licence to clear trades in euro-denominated securities, said Xavier Rolet, “a very minimum” of 100,000 jobs might be at risk. At an appearance in 2017 before Parliament’s Treasury Select Committee, Mr Rolet raised his estimate to 232,000. Britain then had 1.1m people in financial-services jobs, or 3.5% of the workforce, producing 7% of its economic output and generating 11% of tax revenues.
Happily, the disaster never arrived. The industry still employs 1.1m people, who now account for 8% of the economy, or £224bn ($300bn) a year. That is 20% more, in real terms, than when Mr Rolet issued his warning. And the City in particular has prospered. The EU decided not to take an axe to Europe’s financial plumbing after all. Within the Square Mile that bounds London’s historic financial centre, 225,000 people worked in finance in 2024. This was 36,000 more than in 2019, despite the one-two punch of Brexit and the covid-19 pandemic. Another 181,000 worked in auxiliary fields such as law and accountancy, up by 51,000 over the same period.
Numbers matter in London’s financial district; the sense that its buzz is back matters more. Elbow your way through crowds of gilet-enthusiasts clutching pints on a spring evening, and previous fears that working from home would turn the City into a ghost town seem laughable. Plenty more prop up bars in Canary Wharf and the West End—the Square Mile’s spiritual extensions. They are not just there for the nightlife (though it helps, especially for bankers who might otherwise have been relegated to Frankfurt). For the first time in years financiers are also buzzing about London as a place to do business.
Since 2007 Z/Yen, a City think-tank, has maintained widely watched indices of the competitiveness of global financial centres. Whereas London and New York once vied for the top spot (see chart 1), London fell to a distant second place in 2020. It now rivals the Big Apple once more. The recovery, says Z/Yen’s Mike Wardle, has been driven less by quantitative factors than by improving sentiment among those responding to its survey. As the boss of a big asset manager, headquartered in America, puts it, “Half of my staff want to move to London.”
It has not been easy. Though Brexit was not the cataclysm some feared, it and other shifts have hurt the City’s standing. A world which once banked in London now has plenty of other hubs to turn to, from the Asian stalwarts (Hong Kong, Singapore and Tokyo) to upstarts such as Beijing, Dubai and Shanghai. That is more of a problem for the City than for Wall Street. New York owes its clout to its vast, economically vibrant hinterland; London’s used to come from being the financial capital of the world outside America.
Brexit called into question whether it even remains the financial capital of Europe. However, those worries were overblown. True, continental hubs have muscled in on some of the City’s business lines. After the Brexit vote, Amsterdam quickly overtook it as Europe’s share-trading venue of choice. The hottest stock exchange for firms seeking fresh equity capital is in Stockholm. And big investment banks have been building new trading floors in Paris.
But that has not been enough to move the centre of gravity from London. Goldman Sachs and Morgan Stanley have kept their European headquarters there, and JPMorgan Chase is designing a new, bigger one. London is still the capital of cross-border finance in key areas. New Financial, another think-tank, has collected data on Britain’s share of global activity in 12 areas of international finance, comparing the average over the three years to 2025 with that over the three years to 2020 (see chart 2). In seven of these the City has remained the world’s premier financial centre.
As a trading venue for currencies, insurance and derivatives it is unrivalled. Britain’s former position at the hub of a vast empire keen on trade made London a natural home for the international currency market. It still benefits from the network effects this brought: foreign-exchange is more efficient if much of it is executed through one venue. London’s time zone—ideal for buying assets from Asia in the morning, then offloading them to America in the afternoon—helps, too.
Business at Lloyd’s of London, the world’s best-known insurance marketplace, is booming; over the past five years, the City’s share of the market for specialty insurance has risen from 42% to 45%. Half of global trade in interest-rate derivatives (which involve some of the most fiendish maths in finance) is executed in London, as is 38% of that in foreign-exchange derivatives. This relies on a network of boffins and financial plumbing that would be hard to replicate elsewhere.
The City’s record as a capital of capital, however, is more mixed. It is still home to more foreign bank assets, cross-border bank claims and international debt issuance than anywhere else. But the share of global assets overseen by British investment managers has fallen from 13% five years ago to 10%. And whereas the London Stock Exchange was once the venue of choice for international listings, it now hosts barely any: just 1.2% of the global total in the three years to 2025.
This fading allure is often linked to Britain’s failure to nurture and retain corporate titans. Such superstar firms certainly draw investors towards American markets, but the City’s bigger problem is that its stockmarket no longer attracts giants from elsewhere in the world. “When I think of the competition going forward, I don’t look west—I look east,” says Richard Oldfield, boss of Schroders, a big British asset manager. “Hong Kong is clearly winning the race [for international listings].”
And in driving domestic growth, the Square Mile has always underperformed. William Wright, New Financial’s founder, says it is now worse at this than it used to be. His team has examined Britain’s share of global activity in 14 areas of finance linked to the domestic economy, from homegrown equity listings and debt-issuance volumes to assets held by banks, insurers and pension schemes (see chart 3). The City comes top in none of these areas—and over the past five years has seen its share of global activity shrink in all but three. Only in venture-capital investment and issuance of leveraged loans and ESG corporate bonds has it raised its share.
Why, then, do so many financiers think things are looking up for London? One reason is that Brexit looms less large over firms’ decision-making (in a sign of this, Bloomberg reported this week that JPMorgan is transferring some roles from Paris to London). Another is that politicians and regulators are moving policy in the right direction. In private, many praise the Treasury’s continued push to get pension funds to invest more in risky assets, particularly unlisted ones, despite the change of government in 2024.
Rule changes to simplify listing shares in London also survived the switch. “I think a lot of companies don’t realise yet how much more attractive our listing regime has become,” says Steven Fine, boss of Peel Hunt, a British investment bank. This may help keep domestic listings in Britain. City bigwigs also praise the seriousness with which regulators have embraced objectives, under the Financial Services and Markets Act in 2023, to promote growth and international competitiveness.
The Square Mile feels as if an “open for business” sign has been hung above it. And—a third reason for the upturn—relative to New York it can look like a bargain. Huw van Steenis of OIiver Wyman, a consultancy, points to a spate of acquisitions of City firms. In the past year Apollo and Brookfield, two private-markets giants based in America and Canada, have bought British insurers. Nuveen, another American asset manager, has agreed to buy Schroders. Some might worry about selling British heavyweights to foreigners—but the influx of capital is welcome.
Mr van Steenis points to a huge opportunity to finance data centres, infrastructure and defence spending that Britain badly needs. Its government-debt levels are already so high, he notes, that most of the funding will need to come from private capital which regulators could help mobilise. Making it easier for insurers to own such assets would help. Mr Wright of New Financial argues that wherever Britain’s regulation is more stringent than that of the City’s competitors, its government should explain why. “We can’t just say ‘we want to be the international destination of choice’ and then set higher requirements than elsewhere,” he says. That London’s financial district has thrived for so long is no reason to take it for granted. ■