London in the European financial services industry: locational advantage and product complementarities

Abstract

If its prospects were doubted in the early 1990s, London is now the pre‐eminent international financial centre. It dominates its European rivals and is joined with New York and Tokyo in a non‐stop reciprocal global embrace. Whereas some analysts approach this topic concentrating on the nature and quality of market relationships in London, others emphasise the role that government regulation has played in promoting the growth of the City of London with respect to its European rivals. Here, I elaborate the logic whereby financial products and services are produced at a particular point in space even if financial trading is an increasingly ubiquitous virtual activity. I emphasise the competitive dynamics of the financial services industry, the complementary qualities of financial products, and the place of London in corporate global transactions systems. I mean to show that the production of financial products has been brought to ground (so to speak) in London for a variety of (perhaps non‐replicable) reasons. In this regard, my argument is clearly at odds with those analysts of information and communication technology who proclaim the end of geography. However, my argument sits uncomfortably with those who insist upon the persistence and co‐existence of different national financial systems. Implications are drawn for the role of London in the evolving integrated European market for financial services, and for the future of continental European financial centres.