London and New York have been regarded as the world’s two financial powerhouses for decades now. Having flourished during the periods of mass deregulation to the financial markets in the 1980s and 90s, they survived the catastrophic 2008 crash, coming out as even stronger allies. A recent Financial Times article claimed financiers in London now speak more to their New York counterparts than to colleagues in Edinburgh, Paris or Frankfurt. The same goes for New Yorkers and their associates in Chicago, Boston or San Francisco. The two cities battle it out between themselves for first and second place in ease of doing business indexes, while the likes of Hong Kong, Singapore and Paris compete for the third spot on the podium.
And then came Brexit. The vote in June brought a number of constitutional, political and economic issues into question, including whether London could sustain its attraction to the financial services industry, and what this could mean for its relationship with cities such as New York.
The recent decision by La Compagnie, the luxury airline company, to cancel their daily London to New York service from late September 2016, despite the company showing healthy sales figures, is an early indication that some feel London’s current situation is no longer sustainable. La Compagnie issued a statement indicating the flight will be swapped for a second daily flight from Paris to New York, implying this route could quickly become more popular among business elites.
Property investors are also fearful that London’s role in global finance could be eroded in light of Brexit and reduce the value of their investments, the majority of which are office buildings. Much of this news comes after Norway’s sovereign wealth fund announced it has reduced the value of its UK property portfolio by 5 per cent after the government confirmed that “Brexit means Brexit”.
A variety of studies have been done before and after the Brexit vote analysing which European cities could replace London as a financial hub. These gained increasing attention in light of reports that major banks were reportedly planning to relocate large chunks of their staff to cities across Europe. Frankfurt, Paris, Amsterdam and Dublin consistently score highest across such indexes, seen as offering a favourable environment for business, solid levels of infrastructure and the prospect of leading a higher quality of life. It should be noted that prior to the vote on Brexit, London was far and away seen as the most attractive city by financiers in Europe.
Many of the major banks offered a grim outlook on the health of the British economy should Britain vote to leave the EU. However, a strong performance from the FTSE250 in recent weeks has altered the opinion of some experts and offered a more positive view of the future of London’s current status in the business world. PwC recently released a report concluding London will remain “agile and resilient” in light of Brexit given its record on innovation, while economists at Morgan Stanley and Credit Suisse lifted their growth predictions for the British economy across 2016 and 2017. Mark Carney, Governor of the Bank of England, also said the risk of the UK economy entering a deep recession had “gone down”, after the publication of figures showing the UK economy to have rebounded well after initial fears.
All this information therefore begs the question: what next for the relationship between London and New York? Up to this point, they have been somewhat like twins, battling through the good times and the bad, and coming out together even stronger. However, the seismic shift that could come with Brexit could see some new additions to the family.