The financial services industry accounts for about 12% of UK economic output and pays more tax than any other sector. If, after Brexit, the UK can no longer enjoy unrestricted access to the EU market of 440 million people, the country's financial industry could suffer heavy losses.
For centuries, London's financial centre has been known as the "City of London", and its reach has spread from its original core eastward to the skyscrapers of Canary Wharf and westward to the grand townhouses of Mayfair. London holds a pivotal position in the global foreign exchange market, as well as in international bond and fund management businesses, and it hosts more banks than any other financial centre.
But the City is especially vulnerable to the shock of Brexit, because roughly one-third of the trading conducted on London's exchanges and trading floors involves EU clients.
Some politicians and economists have accordingly predicted that after Brexit London will lose its edge as a financial centre, although Brexit supporters argue that the UK will benefit in the long run from being able to set its own rules.
Reuters has built a tracking tool that monitors six indicators to gauge the fortunes of the City of London. The tool regularly examines data such as public transport usage, pub and restaurant openings, commercial real estate and employment, taking the pulse of the City.
"It was very hard at first to assess the real impact of the unfolding Brexit process because the situation was so chaotic," said Tom Kirchmaier, a professor at the London School of Economics who researches the banking industry. "These indicators will help you piece together what is happening."
Nearly 17 months after the UK referendum voted to leave the EU, our indicators point to a slowdown, but not a decisive downturn.
**Commercial real estate**
Reuters obtained property data from Savills and Knight Frank, two large British real estate firms. Savills said it calculates property values based on publicly disclosed property transactions in the City of London; Knight Frank's data comes from owners, developers and brokers.
According to Savills, commercial property prices in the City of London have fallen further since the June 2016 Brexit referendum than at any time between 2009 and June 2016.
Savills said rents in the City of London have fallen about 5% since last year, dropping to 73.4 pounds per square foot at the end of September, from 77.6 pounds.
However, Mat Oakley, head of European commercial property research at Savills, said leasing activity in the City of London in the first three quarters of 2017 was 17% above the long-term average.
Knight Frank said property prices in Canary Wharf were flat compared with last year.
Savills' Oakley said financial and banking firms were "looking for new offices" here for the first time since the global financial crisis.
**The Tube**
Every working day, more than 200,000 people take the Tube through the two main stations of Bank and Monument, making them among the busiest stations in London.
Reuters filed Freedom of Information Act requests with Transport for London, which manages public transport, for passenger traffic at these two stations and at Canary Wharf station.
Transport for London data show the number of passengers using Bank and Monument stations could see its first decline since the final year of the global financial crisis.
Passenger numbers through Bank and Monument stations in the first eight months of 2017 fell 2.7% from the same period of 2016. Before that, passenger numbers had grown every year since 2009.
Traffic at Canary Wharf station has continued to rise. But Transport for London data show the pace of growth has slowed, with growth in the first seven months of this year the second slowest since 2009.
A Transport for London spokesperson said a multi-year project to increase capacity at Bank station that began at the end of 2015 has caused some temporary escalator closures, but has not reduced the number of trains in service.
**Pub and restaurant openings**
Reuters also filed a freedom of information request with the City of London Corporation asking for the number of new venues applying for alcohol licences this year, as well as the number of licence renewals.
So far, Brexit does not appear to have affected this area. Data from the municipal authority governing the City of London show the number of venues such as pubs and restaurants applying for new licences to sell alcohol hit a record high in January-August 2017.
City of London officials said part of the reason is that the area's nightlife has diversified in recent years and no longer serves only financial industry workers.
"The City is safer and the range of nightlife on offer keeps growing," the City of London Corporation said.
**London City Airport**
According to publicly available passenger data, London City Airport - long a favourite for executives flying to European cities and beyond - faces its slowest passenger growth in five years.
The airport, close to the Canary Wharf financial district, saw passenger numbers grow 0.9% in January-June this year, versus an average annual growth rate of as much as 10% over the previous four years.
London City Airport said it has achieved record growth since 2012, but passenger throughput is constrained at peak times and it is seeking to expand.
**Hiring**
Recruitment consultancy Morgan McKinley said the number of job opportunities in London's financial services industry saw its biggest decline in five years this year.
Morgan McKinley specialises in financial industry recruitment. The company said the figures are calculated from the number of job mandates it receives, multiplied by a factor based on the firm's share of the London financial recruitment market.
The recruiter found that 51,922 new financial services jobs were created in the first seven months of this year, down 10% year on year and the lowest level since 2012.
"Given the uncertainty around Brexit, companies are naturally hesitant in their plans and actions to expand hiring," said Hakan Enver, a director at Morgan McKinley.
**Job losses in London?**
A Reuters survey published in September found that about 10,000 financial jobs would be moved out of the UK or created overseas in the next few years if the UK is denied access to the European single market. The companies surveyed employ most of the international financial industry's staff.
The Bank of England's deputy governor Woods assessed the contingency plans of more than 400 banks and financial institutions and said he agreed with the survey findings.
The survey suggests the first round of job losses triggered by Brexit may come in at the low end of the range expected by industry lobby groups and companies, meaning London will retain its status as Europe's pre-eminent financial centre, at least in the short term.
"Your survey results appear to be broadly accurate," Woods said. (End)
Source: Reuters 2017-11-23