05 May 2009

Activity in Financial Markets Drops but London Maintains Lead in Many International Markets

• London maintains leading share in many international markets but loses share in IPOs
• All 12 financial services indicators decline in year up to first quarter of 2009
• UK trade surplus in financial services rises to record £43bn in 2008
• Global investment banking fee revenue down 30 per cent to $59bn

Global share of UK financial services Despite a drop in activity in financial markets over the past year, London has maintained a leading share of international trading in many markets according to the six-monthly International Financial Markets in the UK report by International Financial Services London (IFSL), the independent organisation promoting UK financial services worldwide. London had a 35 per cent share of global foreign exchange trading in 2008, 18 per cent of international bank lending, 18 per cent of hedge fund assets and 29 per cent of international debt securities issuance. Its share of foreign equities turnover and IPOs however halved to 22 per cent and 8 per cent respectively.

Financial markets activity IFSL’s latest City Indicators Bulletin found that there was a further general downturn in financial markets activity in the first quarter of 2009 with all 12 indicators declining year on year. Nine out of 12 indicators were also down between Q4 2008 and Q1 2009. Of the three indicators that rose: UK bank lending to non-financial private sector was up slightly; the value of turnover at Liffe recovered following three successive quarterly declines; and UK mergers continued to show some recovery.

In Q1 2009 the job market saw a large gap of 11,000 between the number of new candidates and new City job vacancies available. “City-type employment” in London declined by 29,000 in 2008. The CBI’s quarterly survey found that although the volume of business in financial services continued to decline in the first quarter, the pace of decline is expected to ease in the second quarter.

A marked downturn in business is being seen in markets directly affected by the credit crunch such as banking, hedge funds and securitisation. Other sectors and markets such as securities markets, insurance and legal services, are facing a fall in business that might be expected during a downturn in the business cycle. In securities markets, for example, the fall in mergers and acquisitions and flotations has contributed to a decline of a third in global investment banking fee revenue to $59bn in the 2008.

Recently published data for 2008 points to more robust activity in other areas. For example, the UK trade surplus in financial services rose 16% to a record £43bn in 2008. This was probably underpinned by growth in banks’ spread earnings from foreign exchange, derivatives and securities transactions. Separate data on foreign exchange trading also points to a buoyant market during 2008.

Sir Stephen Wright, Chief Executive at IFSL, said: “The crisis in global credit markets and the falls in asset values and international trade are hitting UK financial services. But our sector is still very much in business, many of our member firms have as much work as ever, and overall the sector will recover in time. Major emerging markets are still enjoying enviable rates of growth, especially in East Asia, India and the Gulf region, and UK business partners and advisers are still very much sought after to help them develop their potential.”

No comments: