How London Became A Global Financial Goliath

September 28, 2022
Photo by Lucas Davies on Unsplash

It is no secret that London’s place on the global stage is a significant one. London has been a central part in international development, both technologically and economically, for decades upon decades – and continues to play a major part in global financial affairs even as landmark geopolitical relations end.

But how exactly is London such a major player in global finance? The recent Brexit withdrawal agreement, coupled with inflationary rises in the cost of goods and energy, have soured the UK’s domestic economic situation. Still, though, London sits proud in global rankings. How?

A Financial Giant

London is demonstrably a leading global financial centre, having being officially recognised as the second-largest – second only to New York, as evidenced by rankings produced in March of 2022. London’s placement endures despite significant roadblocks to continued growth, in the form of its new trade barriers with the EU and domestic difficulties with inflation.

‘Financial centre’ is not a strict, official term to describe a city or location. Rather, it is a term with a strict definition, that can be used to describe world-leading areas for financial activity and growth; lynchpins of a global economy. Financial centres are cities with diverse and robust linkages to other cities, through which money flows and in which leading businesses and experts can be found.

The efficacy with which a city fulfils these criteria is measured via something called the Global Financial Centres Index, or GFCI. This index is produced by an independent commercial enterprise, and used to illustrate the growth of economies and financial pathways. GFCI ratings are calculated with regard to a wide-spanning rubric, that includes domestic market performance and growth in key industries.

Secrets to Success

But what is it that makes London such a strong financial centre? There are many independent factors, which all work in concert to cement London’s place in the global rankings. One of the key factors relates to its geographic placement in the ‘centre’ of the global map – an absurd suggestion at first glance, but one that makes geo-political sense with regard to trading hours and other financial centres.

London is a robust location for the flow of finances, owing to its unfettered access to markets both east and west – and its ability to act as a catalyst for investment both ways across the Atlantic. The international law firms London plays host to enable seamless and compliant integration of international policies and contracts, facilitating global agreements from a powerful domestic base.

This is also reflected in London’s Stock Exchange, which is the most diverse market in the world with regard to international representation. But the key reason for London’s continued domination of the GFCI rankings is the growth of local talent and expertise, which itself is fuelling world-beating growth in an ever-emerging financial technology sector.

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