London and New York

Peter Weinberg, a former CEO of Goldman Sachs International has a piece in the Financial Times (“How London can close gap on Wall Street”, Financial Times, March 30, 2006) arguing why London could catch up with New York as the world’s leading financial centre. He believes that two factors give London a chance today:

1. The huge amount of Arab money that goes to or through London because of political reasons.
2. The preference for new issuers to list outside the United States due to Sarbanes-Oxley and other reasons.

Weinberg also suggests that an acquisition of the London Stock Exchange by a US exchange could facilitate this process.

We know that the United Kingdom has historically paid a big price for the success of London in the form of subordinating its domestic economic policies to the needs of the City. The United States has clearly shown that it is unwilling to do so. This would mean that even if London does gain, this will be a pyrrhic victory that does little good to the United Kingdom. See my post last year on whether financial centres are worthwhile.

Weinberg does however make an important point that New York’s dominance of global finance cannot be taken for granted. Those of us who had loosely interpreted Kindleberger as implying that a global centre is more or less secure in the absence of war or other serious upheaval should probably think again.

Posted at 3:08 pm IST on Sat, 1 Apr 2006         permanent link

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