Is this a bad thing?
On the one hand, a shrinkage in the financial sector reduces tax revenue. On the other hand, a shrinkage in the financial sector reduces the taxpayer's exposure as the global financial institutions are international in life and local in death.
Did the City generate enough tax revenue for the UK to offset the cost to taxpayers from the current financial crisis? No.
How did London capture the title of world's financial capital? Leading up to the current financial crisis, competition for title of world's financial capital was based on a regulatory race to the bottom.
Based on the number of scandals related to bad behavior by bankers that have originated in London (think manipulating Libor), it is cleared that London won this regulatory race to the bottom.
My question is can London maintain its title by setting off a regulatory race to the top by insisting on transparency in all the opaque corners of the financial system?
London can expect to lose its crown as the leading global centre for high finance this year amid a barrage of City job cuts, falling bonuses and competition from rival hubs led by New York, Hong Kong and Singapore, according to a study.
By 2015 the explosion in jobs in Hong Kong will have pushed the Square Mile into third place on a league table of international financial centres, says the Centre for Economics and Business Research (CEBR)....
Such will be the rise in finance job numbers in the far east that London is expected to only narrowly employ more financial workers than Singapore, the region's number two financial centre, in three years' time, the CEBR predicts.
Its chief executive Douglas McWilliams painted a dire picture of the consequences for the wider UK economy, insisting that "the biggest loser from this is the taxman".
He said: "Taking into account the loss of income from a much smaller City, from lower corporation tax, stamp duty and other city based taxes, I estimate that government revenues from the City in the current financial year are likely to be about £40bn compared with the £70bn which it received in 2007/08 at the peak of the cycle."