Looking at core financial market indicators tends to highlight the enduring success of international finance centres (IFCs) such as London and New York, with these centres invariably sitting on the top of any such ranking. But, an analysis of cost factors, which shows how expensive operating from a certain IFC is, shows a completely different picture.
The Banker has compiled a ranking of IFCs by cost, where cost is based on five factors: the cost of office space, the cost of establishing a business, firing costs, the total tax payable by a business and the social security payable by a business.
Clear of the pack
For the second year in a row, Copenhagen leads the ranking by a relatively large margin, with Johannesburg, Manama, Wellington and Dublin making up the top five. Not a city usually associated with low prices, Denmark’s capital imposes virtually nonexistent firing costs to businesses – employers have limited legal obligations when it comes to severance pay, according to data by the World Bank and database fDi Benchmark. Further, at $32 per square metre, Copenhagen’s monthly office occupancy cost is lower than some emerging IFCs, according to consultancy Cushman and Wakefield, such as Seoul’s $36, which does not feature in the top 25 table. No offshore centre has been examined for this ranking.
Singapore ranks in 12th position, with New York and Hong Kong trailing behind in 14th and 22nd place, respectively. London, the top IFC by several financial market indicators, does not even make it into the top 25 ranking by cost.
Moving up
Dublin, in fifth position, is the highest placed eurozone centre. The UK centres of Glasgow and Edinburgh sit in 17th and 18th position, respectively, and the renowned banking and wealth management hubs of Zurich, Geneva and Luxembourg occupy 21st, 24th and 25th positions, respectively.
If New York has a relatively poor scoring in terms of cost, other North American hubs have fared better. Canada, in particular, which has three of its IFCs in the top 10: Montreal, Toronto and Vancouver. Each of these three Canadian hubs have improved their ranking from the previous year’s table, allowing them to outperform their US counterparts.
Bangkok, in 19th place, has made the most significant progress up the ranking, climbing nine positions compared with the 2012 list. Hong Kong also made a sizable improvement, gaining nine places and moving up into 22nd position.
Africa and central and South America have only one representative each in the top 25, second placed Johannesburg and Panama, which sits in 23rd place. No central and eastern European centres feature in the top 25 ranking.
