Crisis and competition threaten London's financial status

By Peter Griffiths

LONDON (Reuters) - London's position as the world's top financial centre is under threat from the global downturn and fierce competition from New York and fast-growing hubs like Dubai, Singapore and Shanghai, a report for the city's mayor said on Friday.

Facing the worst turmoil in decades, financial institutions may abandon the British capital for places offering lower taxes, more attractive regulation and other incentives such as grants, the report's authors said.

London has a reputation as the world's biggest financial centre, dominating trade in foreign exchange, international bonds, foreign shares and over-the-counter derivatives.

However, it has already lost tens of thousands of jobs this year and billions of pounds (dollars) of investment to centres such as Singapore, Bermuda and Luxembourg, the report said.

"Other centres are simply more co-ordinated, more strategic and more aggressive," said Bob Wigley, chairman of Merrill Lynch for Europe, Middle East and Africa, who led the panel of executives who wrote the report.

The report blamed aggressive competition from other cities, more European Union regulation, unpredictable taxation, high living costs and transport bottlenecks.

It made five recommendations, including the following:

* The city should establish a new body to promote its role as a financial centre.