As a leading global financial centre, London has been deeply affected by the credit crunch. IFSL’s six-monthly International Financial Markets in the UK report reports that beyond the specific challenges in the banking industry, other financial services sectors are undergoing major restructuring and are seeing a decline in business as a result of the credit crunch. These include hedge funds which may see a decline in assets of over a third this year and the securitisation market which has seen issuance in the primary market in Europe fall in the first three quarters of 2008 to one-tenth of issuance in the comparable period of last year.
A marked downturn in business is being seen across other financial markets. In securities markets, the fall in mergers and acquisitions and flotations has contributed to a decline of a quarter in global investment banking fee revenue, which totalled $46bn in the first nine months of 2008. Independent investment banks are fewer in number, but investment banking remains a mainstream activity and should recover in due course.
Despite volatility and loss of confidence financial markets in London have continued to function efficiently and without interruption. Indeed the volatility has contributed to growth in trading on exchanges. Trading in UK and foreign listed companies on the London Stock Exchange grew by 4% in the first nine months of 2008. Trading at the derivatives exchanges LIFFE, the LME and ICE Futures has also reached new highs in the year to date.
The UK continues to have a leading share of global financial markets, accounting for 34% of global foreign exchange trading, 20% of international bank lending, 20% of international marine insurance premium income and 29% share of global foreign equities turnover.