The City of London has retained its crown as Europe’s dominant financial centre as fears of a Brexit-induced exodus failed to materialise. 

London came second only to New York in the latest global financial centres index, which is published by think tank Z/Yen Group and ranks the world’s top 126 finance hubs. 

It takes into account areas such as political stability, labour market flexibility, quality of life, infrastructure and innovation. 

The City comfortably beat rival European centres including Paris, Frankfurt and Amsterdam, which respectively came 11th, 16th and 19th.  

It comes despite repeated warnings from chief executives and politicians that Brexit would damage the Square Mile’s reputation. 

Despite London’s strong performance, the gap between the UK capital and New York has grown since September, when Z/Yen last published its index. 

London’s fintech offering has fallen behind Beijing and San Francisco, as Chinese and US hubs boosted technology development. 

It said: “London’s regulatory environment, anti-corruption regime and rule of law is reasonably good. However, the financial services industry and its regulation needs to move to focus more on the perspectives of individual consumers and beneficial owners of money/assets than on the providers of services.” 

Still, the report highlights how the Square Mile has successfully steered its way through the pandemic and Britain’s withdrawal from the EU, relative to other financial centres. 

A report from EY earlier this year found that a majority of global finance firms plan to establish or extend their operations in the UK this year, with investor confidence in Britain’s financial services sector at an all-time high.

A mass exodus of finance jobs out of London failed to materialise post-Brexit, despite warnings about hundreds of thousands of jobs migrating to the Continent.    

Michael Mainelli, executive chairman of Z/Yen, said: “The second half of 2021 saw a level of confidence in the world economy that we have not seen since the beginning of the Covid-19 pandemic. However the pandemic remains an unpredictable variable, as does the effect of the Russian Federation’s invasion of Ukraine.”

The report will give the Square Mile a boost after it was stripped of its passporting rights following the UK’s exit from the EU, which gave companies full access to European markets.

In recent months, the bloc has taken an increasingly hard line against European institutions that have failed to shift lucrative clearing business out of London to the Continent.