Why does London remain the financial capital of Europe?

  -Udayveer Singh Grewal 

Introduction

Whenever I think of finance, two cities that come to my mind are London and New York. Aspiring to become an investment banker comes with a strong drive for success and hours spent researching about the vast world of Finance. This blog is a medium for me to share my thoughts and research with the world.

The History of London 

The history of London as a financial capital is a rather complex one and it reflects the constant evolution of global markets and finance.

When one walks through Canary Wharf we see the marvels of civilisation and how far London has come, glass buildings, global banks and billions of pounds in assets. We forget how it all started with the Romans founding Londinium around 43 AD. Its location played a great role, right on the bank of the River Thames, in boosting trade and commerce.

In the 17th century, the goldsmiths revolutionised what banking meant; they developed many modern banking functions such as maintaining deposits, making loans and keeping reserves.On 27th July 1694, the Bank of England was initially founded as a private bank, primarily to fund the war effort against France. This was a great move as it stabilised the UK economy by providing financial support to the government and managing the nation’s currency. Soon after the stock exchange was established, London borrowed financial innovations from Amsterdam, improved them and became stronger than Amsterdam itself. This shows us the importance of working smart as if they had just simply copied them, they might have not been the financial capital of Europe or the world. Paris gave London some competition but it was short-lived because the Bank of France landed in trouble after France lost a war with Prussia. The US emerged as a financial power and took London’s spot until the eurodollar market developed in the 1950s and London took a large share of it. Until Brexit London sat at the top spot, Brexit made major companies move their assets from England to other European countries. In 2023, New York City regained the top spot as the financial centre of the world, with London second.

London today is home to a few of the greatest banks in the world such as HSBC, Barclays and Lloyds Banking Group. The biggest investment banks like JPMorgan and Goldman Sachs also have offices in London. In 2023, the United Kingdom saw 235 foreign direct investment projects accumulating to £1.6bn in financial and professional services. The London Stock Exchange is headquartered in London, it has a market capitalization of over 4.65 trillion British Pounds. It is the largest stock exchange in Europe.Companies listed on the London Stock Exchange raised over £17bn in 2023, far ahead of Paris at £10bn and Frankfurt at £8bn.

Favourable Timezone

A factor which is not directly linked to its financial standing is its timezone. It is located right between asian and North America which permits it to interact with both regions in one day. London banks can easily coordinate with teams in asian and North America in one day,

This gives London a massive strategic edge, it contributes to the reason why many global companies chose to keep key offices in the city. 

London is home to many of the world’s top colleges such as LSE, UCL and Imperial. These colleges give a bright future to bankers and financial talent.

Another key reason London thrives as a financial centre is extremely basic yet a huge part of why it is the financial centre, English is the global language of business and finance. All major deals take place in English.The British invented English, it is their native language which gives them an edge at it.The linguistic universality removes barriers such as using translators, speeds up the process and builds trust

Resilient Throughout 

In recent years, especially after Brexit London has faced competition from cities like Paris, Frankfurt and Amsterdam as certain firms relocated to retain access to the EU market. London still holds the position and simply for most is the first option to work in finance. It continues to adapt by exploring more flexible regulations, investing in fintech and green finance.

London is constantly facing challenges just like any other city, its strengths overcome these challenges. Its place as the financial capital of Europe is embedded in history, it continues to evolve and lead.

For someone like me, an aspiring banker, London represents a dream. Its resilience throughout time motivates me and pushes me closer towards my goals that I am on the pathway to achieve.