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London Returns to the Rankings of Financial Centers Amid a Pandemic Boom in Productivity

London returned to the rankings of financial centers amid a pandemic boom in productivity and posted the most substantial rise in rating among the world’s 20 largest financial centers in the past six months. The strong performance of its financial services sector amidst the COVID-19 pandemic offset earlier Brexit concerns, according to the latest Global Financial Centres Index shows.

In collaboration with China Development Institute, the index, compiled by the Z / Yen Group, is published twice a year, in March and September. The most recent survey covers 111 major global financial centers and assesses five areas: business environment, human capital, infrastructure, financial industry development, and reputation. The latest index, its 28th installment, shows that 14 of the world’s 20 largest financial centers have seen price increases since March. London recorded the most massive rating increase, 24 points. While still in second place in the world rankings, London now ranks only 4 points behind world leader New York, which has posted a rating gain of only 1 point since March, says the Z / Yen Group. 

According to the Z / Yen Group, several factors, including increased productivity from working from home and less travel, London’s resilient infrastructure, and government support, were behind the U.K. capital’s strong performance, according to Z/Yen Group. The ratings of all 10 of the world’s leading financial centers have risen over the past six months, reversing recent downward trends. Only 12 of the next 40 centers in the ranking experienced a rating increase, while 27 experienced a rating decline. Overall, the mean rating of centers in the index dropped more than 41 points, or 6.25%, since the March 27 GFCI installment, Z / Yen Group, said.

 This could indicate a more general decline in confidence in global financial centers due to uncertainty about the economic impact of COVID-19 and other disruptive factors such as international trade tensions, Mike Wardle, head of indices for Z / Yen Group said during an index presentation on September 25. Geopolitical and local unrest also contributed to the lack of confidence, according to Z/Yen Group. However, the growth in the rating among the world’s top 10 centers indicates greater confidence in them despite the impact of the pandemic, Wardle said.

London’s rebound Unlike its performance in the index’s last two installments, GFCI 26 in September 2019 and GFCI 27 in March 2020, London outperformed mainland European rivals such as Frankfurt, Paris, and Amsterdam. London recorded the largest rating gain among the top 20 financial centers in Western Europe, while both Frankfurt and Paris have seen a 5-point drop and have lost three positions in the global rankings since March. According to Michael Mainelli, executive chairman of the Z / Yen Group, the volatility of the ratings in the GFCI is not uncommon. Still, London’s 24-point rise is material, according to Michael Mainelli, executive chairman of Z/Yen Group. A few factors may have contributed to the increase, one of which has been the resilience of infrastructure in London during the COVID-19 blockades, he said at the GFCI 28 index presentation. 

At the start of the pandemic, there were doubts about London’s infrastructure, especially in broadband, at the onset of the pandemic. Still, it functioned “brilliantly” when most of the city’s financial sector employees were sent home to work, he said. Another primary rating driver was the increase in productivity of London’s economic workforce as city workers gained an extra 1-2 hours per day, which they had previously lost on commuting, Mainelli said. “Some of the cost bases in financial services dropped, and all of this combined with a huge government injection of cash,” he said. However, any of these factors could change once the world has yet to see the full effect of the COVID-19 pandemic, he said. Remote work Given the shift to working from home during the epidemic, Z / Yen studied working patterns in their latest GFCI survey. 

The group found a significant difference in staff sentiment towards remote working in Western Europe and other regions. While in most areas, respondents plan to spend 30% to 40% of their time in the future, that share is nearly 60% in Western Europe. Perhaps because COVID-19 has not had quite the same impact in Asia, that region seems to be looking more to get back to where it was in 2019, Mainelli said. Overall, a 20% shift of work from the home office is expected, and there is a powerful feeling that working from home is here to stay, certainly in financial services,” Mainelli said. “We surveyed approximately 135 chief executives last month, and 84% of them expected working from home to increase,” he said, referring to the total number. On the flip side, time spent with customers in the regions remains about 20%, unchanged from pre-COVID-19 times, he said.

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