A view of London's financial district.
A view of London's financial district. - 
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Some good news for London this week: the British capital came top in Price Waterhouse Cooper's sixth annual league table of international cities.

London was rated the world's foremost "economic powerhouse and centre for culture, education and innovation." The accolade should go some way to soothe this city's wounded pride: London recently lost its number one slot in the prestigious Global Financial Centre Index.

"For the first time London has fallen below New York. So New York is now number one financial center. London's number two," says Mark Yeandle, who compiles the Global Financial Centre Index for the Z-Yen consulting firm. "London has dropped more points than any other center in the top 50."

Yeandle points out that confidence in "The City" –as London's financial center is known -- has waned because of two big constitutional uncertainties. First, in September, Scotland votes on independence, which could lead to the break up of the United Kingdom. Second, within the next three years the UK may vote to pull out of the European Union, with unpredictable consequences for its economy.

But Yeandle claims the City has been more seriously damaged by a series of scandals including bankers and dealers manipulating the LIBOR interest rate.

"London used to have a reputation for being quite squeaky clean," says Yeandle. "Now, we know that London isn't quite as angelic as some people believed a few years ago."

Advocates for London say the damage has been exaggerated. David Slater - who promotes the British capital– says regulators have been cleaning house and cracking down on the abuses . And he points out the City's share of the world's biggest market – foreign exchange - hasn't suffered at all. Far from it.

"Five years ago we had 40 percent of the global foreign exchange. That's now up to 50 percent," says Slater. "So that's certainly going in the right direction and shows that there's confidence in the market."

For all their abuses and bungling before the crisis, City financiers have proved adept at picking up new business. Andrew Hilton of the Centre for the Study of Financial Innovation says London is now leading the world in the offshore trading of the Chinese currency – the renmimbi.

But those constitutional uncertainties have not gone away. The vote on Scottish independence and the possible referendum on EU membership are a worry. London's fortunes – like its financial markets – seem likely to fluctuate.

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