‘Banker bashing’ blamed for London losing status as world’s top financial city

London has lost its status as the world's unrivalled financial capital after demands for curbs on bonuses and tougher regulation of the City.

The capital is now only ranked equal to New York, having held on to the top position since overtaking the Big Apple in 2007, according to an influential survey published today.

In what was described as "a wake-up call" for London, the survey also showed other "secondary" European financial centres such as Frankfurt, Zurich, Paris and Geneva starting to catch up.

City leaders said the latest Global Financial Centres Index rankings justified fears that London's international image has been harmed by "banker bashing" and the Government's moves to raise taxes on high earners and beef up regulation.

Stuart Fraser, policy chairman for the City of London Corporation, said: "You can't take this route without endangering the competitiveness of London."

Although London has held on to its world leadership for asset management and professional services such as accountants and lawyers, it has been eclipsed by New York for government and regulatory services and by Hong Kong and New York for insurance.

It is the first time the City has fallen out of the top two for any major area of financial services.

Another finding that will concern City leaders is that London is now ranked behind New York for the quality of its people, for the "business environment" and for infrastructure.

London overtook New York as the world's financial capital in 2007 in the wake of the Sarbanes-Oxley reforms in America, which imposed far greater personal responsibility for corporate wrongdoing on senior executives. This resulted in a surge of listings of companies on the London Stock Exchange before the credit crunch.

However, the increase in personal taxes on high earners to 50 per cent and a one-off payroll tax on bonuses over £25,000 has raised fears of a financial "brain drain" out of London.

The survey of 75 leading financial centres around the world was taken between July and December when discussion of tougher regulation and higher taxes in the UK was at its height.

Mr Fraser said: "Damage has been done to the Square Mile's perceived competitiveness relative to New York but this is not irreversible provided the new incoming government — regardless of political persuasion — makes a clear, positive statement on their direction of travel' on tax and regulation."