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Global Financial Centre Competitiveness
Professor Michael Mainelli, Executive Chairman,The Z/Yen Group

[An edited version of this article first appeared as “Start Spreading The News … London’s Calling”  Financial Services Review, Association of Chartered Certified Accountants (May 2007) pages 16-17.]

Start Spreading The News … London’s Calling

Frank Sinatra or The Clash? The Global Financial Centres Index (GFCI) evaluates the competitiveness of 46 financial centres worldwide.  The GFCI, commissioned by the City of London Corporation and researchedby Z/Yen Group, rates London at 765 points on a scale from 1 to 1,000, and New York at 760, just five points apart.  The third highest-rated city is Hong Kong at 684, 76 points lower.  The GFCI top 20 are:

Financial Centre






New York



Hong Kong






























San Francisco









Cayman Islands



Hamilton (Bermuda)






Channel Islands



Washington D.C.



The GFCI uses nearly 4,000 city ratings by financial services professionals, combined with nearly 50 instrumental factors in five main categories:

  • ‘People’ - the availability of good personnel and the flexibility of the labour markets;

  • ‘Business Environment’ – regulation, tax rates, levels of corruption and ease of doing business.  Regulation is currently cited as the decisive factor in the relative competitiveness of London and New York;

  • ‘Market Access’ - levels of trading, as well as clustering effects from having many financial services firms together in one centre;

  • ‘Infrastructure’ - the cost and availability of property and transport links;

  • ‘General Competitiveness’ - the concept that the whole is ‘greater than the sum of the parts’.

‘Excelling Towards Excellence’ – An All-Round Thing

The GFCI shows that you need to be good at most things to be a leading centre.  London and New York are in top quartile of over 80% of the nearly 50 instrumental factors used to build the GFCI.  Being a truly international city helps – 40% of Londoners are foreign born and over 300 languages are spoken.  The capital’s two strongest football teams now often field teams with no English players at all.  London and New York are both places where the best international firms congregate and trade with each other.  The main negative comments are corporate tax rates, transport infrastructure and operational costs.  New York is also very strong in most areas - people and market access are particular strengths.

Compared with earlier studies of financial centre competitiveness, the emphasis seems to have moved from quality of people being the key criterion, to regulation and taxation.  Hong Kong is a thriving international centre, performing well in all of the key competitiveness areas, especially regulation.  Singapore is close behind, with banking regulation, again, seen as being excellent.  Zurich is a very strong niche centre - private banking and asset management provide a focus.  Zurich performs well in many areas of competitiveness but loses out slightly in people factors.  Successful financial centres appear to fulfil one or more roles:

  • ‘Global’ financial centres that are truly global foci, where only two can claim that role, London and New York;

  • ‘International’ financial centres such as Hong Kong that conduct a significant volume of cross-border transactions;

  • ‘Niche’ financial centres that are worldwide leaders in one sector, such as Hamilton in reinsurance;

  • ‘National’ financial centres that act as the main centre for financial services within one country, such as Toronto (12th) in relation to Montreal (21st) and Vancouver (27th);

  • ‘Regional’ financial centres that conduct a large proportion of regional business within one country, e.g. Chicago.

Regulation – A Taxing Affair

Very few people believe that London or New York will lose their positions as global financial centres within the next ten years.  Research in 2005 showed that people factors were most important.  Now the biggest threats, and opportunities, for London and New York come from changes in the regulatory environment or taxation.  Sarbanes–Oxley has adversely affected New York while the benign regime of the Financial Services Agency (FSA) has benefited London.  Even if the FSA is seen as ‘least bad of a bad bunch’ with significant potential for improvement, it is true that heavy-handed and confusing USA regulation is hurting New York.  London’s Mayor Ken Livingstone was asked what he considered London’s competitive advantage over New York and replied, “Two words: Sarbanes-Oxley”. It must be gratifying for economists to see the cause of potential relocation attributed so directly to regulation:

The city’s [New York’s] Economic Development Corporation said yesterday it is hiring McKinsey and Company for $600,000 to formulate a strategy for New York to maintain its title as financial capital of the world … London has gained ground on Wall Street in recent years, experts say, with expanding European markets, an explosion of activity in the hedge fund business and an increasing number of companies that are choosing to go public on the London Stock Exchange, as opposed to in New York.  Some say that London is benefiting from America’s Sarbanes-Oxley Act of 2002, sweeping legislation that created new corporate governance, financial disclosure, and public accounting standards for companies.  Critics said the legislation increased the cost of doing business here.

[David Lombino, “Firm Hired To Boost City’s Competitive Edge versus London”, The New York Sun (27 September 2006)]

Guanxi Matters

One area for future research and work on instrumental factors is the ability of a global financial city to harness effectively the work of other specialist financial centres.  London seems to do this well, witness the strong links with Dublin, Hamilton, Switzerland and the Channel Islands.  Presumably, a more mixed model of a global financial city is that it leverages on the strengths of its connections – culture, immigration, taxation, air transport, telecommunications – with other financial centres.  The following diagram illustrates the strength of connections.  When looking at people who ranked three cities or more, not based in the UK or the USA, it becomes obvious that London and Hong Kong are the ‘foreign’ cities non-residents know best and are prepared to rank.  New York drops to 6th in this regard, indicating that for a significant number of non-residents it is not their ‘connected’ global city.  There may be a number of reasons ranging from visa issuance, to telecommunications or old school ties, but New York just isn’t as connected with non-nationals.

As with any home team bias, cities need to play to their strengths.  This suggests at least two ways for smaller cities to compete.  First, make sure that the inducements to set up new businesses are high, e.g. Dubai.  After you have the people, the home team bias might help them stay.  This approach is an old one, witness the large number of development agencies, overseas representative offices and other inducements to help people and organisations make the first big step, any presence at all.  To this mix should clearly be added regulatory competitiveness and tax competitiveness. 

Second, promote your focal sector with zeal.  Rather than stretching credulity by claiming to be a global financial centre across the board, be very specifically honest.  Define your competitive sphere so narrowly that you are guaranteed to be ‘first in your class’. Then proclaim loudly that you are the pre-eminent centre for that small global financial sector.  If you can’t be a Big Apple, being a “big fish in a small pond” will do nicely.

The GFCI is coming out twice a year.  Don’t just watch – click here to participate.


Professor Michael Mainelli, PhD FCCA FSI, originally undertook aerospace and computing research, followed by seven years as a partner in a large international accountancy practice before a spell as Corporate Development Director of Europe’s largest R&D organisation, the UK’s Defence Evaluation and Research Agency, and becoming a director of Z/Yen (  Michael is Mercers’ School Memorial Professor of Commerce at Gresham College (

 Z/Yen is a risk/reward management firm helping organisations make better choices.  Z/Yen operates as a think-tank that implements strategy, finance, systems, marketing and intelligence projects in a wide variety of fields (, such as developing an award-winning risk/reward prediction engine, helping a global charity win a good governance award or benchmarking transaction costs across global investment banks.  Z/Yen’s humorous risk/reward management novel, “Clean Business Cuisine: Now and Z/Yen”, was published in 2000; it was a Sunday Times Book of the Week; Accountancy Age described it as “surprisingly funny considering it is written by a couple of accountants”.

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