Europe's most important financial hub is moving to London

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Europe's most important financial hub is moving to London

Paris and Frankfurt have their work cut out if they want to challenge London seriously.

That's the conclusion of an analysis by London-based think tank New Financial, which found five times more international financial activity in Europe than France or Germany.

While the report relies on data from 2019 - before Brexit came into effect and before London lost its crown as Europe's Top Place to Buy and Sell shares - it underlines the City's lead over European rivals as a hub for derivatives and foreign-exchange trading, asset management, Venture Capital and Banking

This advantage, which has been built over decades, has been dented by Brexit in the recent years. Financial firms have been unable to launch their London bases for some business inside the bloc, forcing banks like Goldman Sachs Group Inc. and JPMorgan Chase Co. to transfer hundreds of millions of dollars in assets and thousands of staff to the continent. However, London remains Europe's dominant financial hub for now.

This report shows you would have to move a huge amount of activity from the U.K. before France, Germany or any other EU financial center is dramatically closing this gap, William Wright, managing director of New Financial, said in an email. Wright said that even if 10% of all international activity was to move to the U.K., the country's road would still be a long way ahead.

More business could be moved away from London. The Brexit trade deal left out financial services, while a separate agreement on how European and UK financial regulators would cooperate was also troubled as global relations threaten to turn sour. The bloc has signaled that it's not in a rush to grant so-called equivalence decisions that would enable European business to be done from London

According to the report the United States ranked as the second largest financial center in the world after the US. France and Germany were third, while China was sixth and seventh respectively.

While the U.K. has never trailed its European rivals, the report shows it is well behind the U.S. and that it has lost further ground since 2019. As a market source, the city lost 2.3 trillion pounds of its lucrative derivative trading business in March alone, according to an estimate by Deloitte and IHS Markit Ltd. with Wall Street trading platforms the most gaining the most.

More stories like this are available on bloomberg.com.

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