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Chart: Which European city relies most on the financial sector?

Everyone knows that London is the financial capital of Europe. It’s not, however, the city which is depends most on the banking sector when it comes to paying its way in the world. Check out this graph, which shows the share of the economy this industry makes up in each of the continent’s four major financial centres.

Financial intermediation and real estate as share (%) of city’s total GDP. Source: CityMetric Intelligence.

By far the most dependent on its banks and bourses has historically been Frankfurt, where, as recently as the late 90s, finance generated more than half of the city’s GDP.

Since the turn of the century, though, it’s been in something of a decline. Data from the city authorities shows that the number of Frankfurters employed in the sector fell from 75,100 in 2000, to 65,900 in 2012; over the same period, the number of banks in the city declined from 340 in 2000 to around 260. Perhaps most reflective of a decline in importance, though, is the fall in the number of foreign banks with a foothold in the financial district, which fell from 66 in 2000 to 38 in 2012.

The main beneficiary of this shift has, of course, been London. Despite talk in the late 90s that staying out of the Euro would do untold damage to the City, London’s financial sector has grown markedly as a share of the city’s GDP. And while it slipped slightly in the wake of the crash, this wasn’t enough to significantly diversity the city’s economy.

This boom has done wonders for all sorts of aspects of London life, funding shiny new developments and (let’s be honest) improving its restaurants no end. But it’s also done something awful to house prices. Worse, in many ways, is the resulting vulnerability of the British economy to financial shocks. Frankfurt is still more dependent on the masters of the universe than London is. But London makes up more than a fifth of the UK’s GDP; Frankfurt provides barely a fiftieth of Germany’s. In the event of another crisis, it’s the Brits who stand to suffer.

They can take some comfort, perhaps, from the fact that the Swiss would be suffering right alongside them. The Global Financial Centres Index 15 ranks London as the world’s second financial centre, behind only New York. But Zurich and Geneva are fifth and ninth respectively (Frankfurt is 11th). Between them, they represent nearly a third of the Swiss economy.

In all, the Alpine country is the second largest financial market in Europe after the UK, with CHF 11.3trn (£7.4trn) of assets under management. That’s a cool 20 times the national GDP.
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