Finance sector booms

A general view of the Canary Wharf district of London in this file photo taken March 27, 2007. The biggest rise in foreign business in nearly nine years spurred strong growth by the finance industry early this year in another sign London could be catching up with New York as the world's top financial centre.

LONDON (Reuters) - The biggest rise in foreign business in nearly nine years spurred strong growth by the finance industry early this year in another sign London could be catching up with New York as the world's top financial centre.

The survey by the Confederation of British Industry (CBI) and consultants PwC on Monday showed a balance of 21 percent of respondents reported more business from abroad in the three months to the end of March, the highest figure since 1998, when it hit 23 percent. It was 4 percent in the previous quarter.

"What it seems to be is incoming investment into the UK and I think that's partly reflecting the stature of London as the growing financial centre globally," said John Hitchins of PwC.

"It's quite clear London currently is growing faster than New York and I think that is actually attracting investment."

A net 14 percent expected higher foreign demand in the next quarter too. In terms of overall volumes, 34 percent said business grew during the quarter, much more than expected, and 33 percent saw a further increase in the second quarter of 2007.

Growing incomes also led to the first rise in overall profitability for six months, with nine percent reporting an improvement.

HOT TOPIC

New York versus London has become a hot topic recently -- especially since a report in January from consultants McKinsey highlighted "London's superior momentum" when it came to making the city more desirable as a place to do financial business.

London, which lost its place to New York as global finance capital early last century, has gained from thriving merger and acquisition activity, as a hub for credit derivatives trading and a European centre for hedge funds and private equity firms.

Annual bonuses for London's stock traders and sales people outpaced those on Wall Street, according to a report in March.

The survey published on Monday showed that despite the growth in foreign business, 40 percent of respondents pointed to foreign competition as a factor likely to limit business over the coming year, up from 33 percent in December.

"While recent growth has been boosted by better overseas demand, there are concerns of tougher international competition in the future," said Ian McCafferty, the CBI's chief economic adviser.

The survey indicated a fall in record employment growth at the banks, building societies, traders, funds and insurance firms surveyed, with a balance of 39 percent reporting an increase compared to 55 percent at the end of 2006. A net 34 percent expected an increase in the three months to come.

When it came to business sentiment, a balance of five percent of respondents said they were more optimistic now than in the previous quarter, although the survey took place during the recent bout of market turbulence.