As global finance leaders take a fresh look this year at the hubs that have long been their homes, they’re increasingly seeing high costs and political chaos.

Amid a work-from-home boom spawned by the Covid-19 pandemic, those headwinds threaten to redraw the global map of where money is raised and made. In New York, Goldman Sachs Group Inc. and Moelis & Co. may soon see key moneymakers heading to Florida, moves that highlight the high taxes and expenses in their hometown. Meanwhile, Brexit is peeling away assets and talent from London, while China’s heavy hand is undermining the longtime appeal of Hong Kong.

“Financial hubs are under threat like never before,” said Michael Mainelli, co-founder of Z/Yen Group, a London-based think tank that compiles the Global Financial Centres Index. “The city under most pressure is Hong Kong. New York has more economic diversity perhaps even than London. Its problem is that it’s quite domestic,” while business in London tends to be more international.

While great cities remain great through constant reinvention -- in the mid-20th century, New York was home to the busiest seaport in the world -- some just fade. Think of Florence, Italy, the birthplace not just of the Renaissance but of modern banking. Recent signs point to an acceleration in the dispersion of finance jobs and expertise, especially since full-time office work could become a relic of the pre-pandemic era.

Employers expect working from home to average two days per week, according to a survey this month by Barclays Plc. The “WFH revolution” translates into a “10% to 20% structural reduction” in office demand, with the U.K. the most vulnerable, according to the report.

London’s share of real estate investment among the largest European cities this year through September has more than halved from a peak of about 40% a year before the 2016 Brexit referendum, according to data compiled by Real Capital Analytics and Savills Plc. In contrast, Paris, Berlin and Frankfurt have all attracted a greater share.

City Living
As the Brexit transition period heads toward its Dec. 31 deadline, marking the final break between the U.K. and European Union, Goldman Sachs and JPMorgan Chase & Co. have indicated that, between the two banks, more than 300 employees will move to continental cities. Goldman is shifting as much as $60 billion in assets to Frankfurt, while JPMorgan is moving about $230 billion to the German city.

Consulting firm EY said in a report last month that only 10% of big financial-services firms are planning to establish or expand operations in the U.K. in the coming year, discouraged by the uncertainties of Brexit and the Covid-19 pandemic. That is down from 45% in April and bodes ill for the U.K., where finance employs more than 1 million people, makes up about 7% of the economy and accounts for more than a 10th of all tax revenue.

So far, few are writing obituaries for London or any of the world’s other financial headquarters, pointing to their hard-to-emulate combination of talent, resources and services.

“We will still need hubs, as proximity and personal contact matter a lot,” said Tim Skeet, a banker who has worked in the City of London for nearly 40 years and advises the International Capital Market Association. “The concentration of brainpower and financial firepower is useful to the high-end, people-driven businesses we represent.”

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