In London calling, James Harding explains how London is rising as New York is falling:
In business terms, London’s claim to be the world’s favourite marketplace is not just a boast, it’s a statistic: the report found that in the past five years international companies have not been choosing to list on the New York stock exchanges but to float their businesses in London. In 2001 the US accounted for 57 per cent of all stock market flotations over $1 billion — otherwise known as initial public offerings (IPOs). By 2006 this had fallen to 16 per cent. In the same period, Europe’s share of the world’s big IPOs had risen from 33 per cent to 63 per cent.Small companies as well as big ones have been choosing London. The Alternative Investment Market, which is where start-ups tend to go to sell their shares in the UK, listed 870 new companies in the five years since 2001, while Nasdaq, the market for new ventures in the US, listed 526.
Just to be clear, IPOs account for only a fraction of the investment banking business. New York still has much more money flowing through it than London. The financial stock of America’s business capital, which means the amount of money that flows through it in shares, debt and bank deposits, was $51 trillion in 2005. In Europe as a whole it was $38 trillion.
But London has the momentum. [...] London’s financial workforce has been growing while New York’s has been shrinking — the City added 13,000 jobs between 2002 and 2005, expanding by 4.3 per cent to bring London’s total financial labour market to 318,000, while New York’s slipped back 0.7 per cent to 328,000. If the trend continues, at the end of next year there will be more people working in finance in London than in New York.
Wall Street has blamed the resurgence of London on regulation, immigration laws and the tax regime for foreign residents. There is some truth to this. After a spate of high-profile corporate collapses, Congress passed a set of new corporate governance rules known as Sarbanes-Oxley that made the whole business of operating a company in the US a lot more tiresome. Foreign companies used to consider a New York listing a badge of honour. In the past three years, many have come to see it as an unnecessary bother. They have come to London instead.