London and New York have been fighting for the title of the global financial centre for years. Both have strong claims. The rivalry between the two is one of the most favourite topics in financial media.
Both have developed strong startup ecosystems. The one in New York is bigger, but London’s ecosystem is growing much faster. As I argued in this post, there are some reasons why European cities may pose a threat to their counterparts in Northern America in the race for the future leadership in startup economy. One of the most important of those reasons is that European cities enjoy the access to a much larger, more diversified and less expensive talent pool.
The return of the king
For many years, London had been the financial capital of the world. It benefited from the rapid growth of British Empire and free market economy. This ended in the 20th century. New York City took the reins after WWII, which ended Britain's role as a superpower and started the era of the US dollar as the global currency.
The rule of Wall Street started to wane with the onset of the financial crisis of 2007-08. In 2015, London finally officially outperformed its rival and took the lead in the rankings and did it again the following year. For example, it dominated each category of Global Financial Centres Index, compiled by Z/Yen consulting group: "business environment", "financial sector development", "infrastructure factors", "human capital", "reputation and general factors".
As many as 40% of the 250 largest companies in the world have their main or European headquarters in London, according to a study by Deloitte, and 60% of all non-European companies have their European headquarters in London. The study shows that London is the primary destination for the top talent; nearly half of all high-skilled workers in the top five European business cities are employed there.
A fintech founder no-brainer
If a city has just emerged as the leader in the ranking of top financial centres, it has a strong case for being the best place to develop a fintech startup. What you gain by being in London is the access to the richest clients and the chance of generating profit margins much higher than in any other sector.
Running a startup from London gives you some great advantages:
- Easy access to financing
- Great opportunity for partnership with financially savvy co-founders
- Chance to meet the richest clients
- Multicultural environment that generates new ideas and helps to reach global markets
- Non-stop plane connections to almost every place on earth
- It's close (geographically and culturally) to both Europe and the US
- Local authorities and the UK’s government invest strategically in London’s tech ecosystem
- Talented workers from all over the world
- Access to Central European remote teams
- One of the most interesting and beautiful cities to live in
And it's even more attractive for a fintech startup. These are the benefits I could think of:
- Global prestige and marketing advantage from being considered a financial market insider
- Access to high-profile clients: banks, insurance companies, as well as financial professionals
- The same groups that can be your clients may become valuable business partners or investors
- Opportunity of developing relations with financial media
New opportunities and risks for London
London's present leading position will not last forever, but there are some signs London should stay in the lead in the foreseeable future. The recently elected mayor, Sadiq Khan, made strengthening London's unique status one of the priorities in his campaign. Improving the friendly environment for start-ups was an important point of the candidate's manifesto. New authorities plan to remove one of the main competitive disadvantages of the city: relatively poor plane connections with Latin America and Asia – the fastest growing regions of the world.
As with the British economy in general, the future of London is uncertain due to the possible Brexit, which will be decided in a referendum on 23rd of June. Some experts have pointed out that leaving European Union may cost London its position in global rankings. We'll be all watching the referendum carefully, hoping it will only help London keep its momentum.
It’s of no surprise that startups based in London account for 24 of the companies on FinTech50 2016 list of European FinTech startups. If you can choose London and you are able afford the high cost of operating your business from there, go for it.