New York City is losing its competitive edge and could give up its lead as the financial capital of the world in ten years according to a report commissioned by Mayor Michael Bloomberg and NY Senator Charles Schumer.
According to the report from the consulting group McKinsey & Company, New York and other US cities are falling behind in financial services while cities including London, Dubai, Hong Kong and Tokyo are surging ahead. ''Unless we take corrective steps, and soon, we're going to see the US's leadership in global financial transactions dwindle, putting a chill on the nation's economy and the city's'' said Bloomberg during a meeting in City Hall. ''That will spell fewer jobs and slower overall growth.'' The report concludes that New York and the US are losing the advantage because of several main factors: US regulatory framework, particularly the Sarbanes-Oxley Act, is ''a thicket of complicated rules, rather than a streamlined set of commonly understood principles, as is the case in the United Kingdom and elsewhere.'' The anti-fraud law was passed in 2002 in response to the accounting and finance scandals that embroiled Enron Corp, WorldCom Inc and other US companies. While New York offers a promising talent pool for its financial services work force, ''we are at risk of falling behind in attracting qualified US and foreign workers.'' The legal environments in other nations ''far more effectively discourage frivolous litigation''. One in nine New York jobs is in financial services, which contributes more than a third of business income tax revenues to New York's economy. At nation level financial services is the third-largest sector of the US economy, contributing 8% of GDP, behind only manufacturing and real estate. Mayor Bloomberg, a Republican built a fortune from the financial information company Bloomberg LP., which he founded in the early 1980s. Already, the Securities and Exchange Commission last month agreed to ease some rules within Sarbanes-Oxley, but the McKinsey report suggested the SEC go further and consider exempting foreign companies from certain parts of the act, ''provided they already comply with sophisticated, SEC-approved foreign regulators.'' The report also raises the idea of creating a special ''international financial services zone'' in New York, where tax breaks and other incentives could be used to lure new foreign firms. Other suggestions include a Congress-created commission on financial competitiveness, to address the structural issues for the long term, and a similar local venture to promote New York's interests. According to the report, the trends being observed today could result in significant setbacks: The United States stands to lose ''substantial market share in investment banking and sales and trading over the next five years,'' equal to billions of dollars. ''If New York does not stay No. 1 in terms of financial services, we could lose everything else,'' said Senator Schumer. ''So much of what happens in this town is because we're the world financial centre.'' To reach its findings, the McKinsey team interviewed more than 50 CEOs and business leaders, and gathered information through surveys of more than 300 other leaders and senior executives.