LONDON IS losing its status as the world's leading financial centre following the collapse of mortgage lender Northern Rock, the proposed tax crackdown on foreign nationals who work in the UK and concerns about the taxation regime, a survey has found.

The British capital is still the leading international financial centre, according to the Global Financial Services Index, which questioned more than 1,200 financial services professionals. But its lead over New York has halved in the past six months and questionnaires returned since the index was last published in September show New York outstripping London.

The index is commissioned by the City of London Corporation, the local authority for the district. It rates financial centres on property costs, regulation, taxation, supply of staff, responsiveness of government and quality of life.

Offshore centres such as Jersey and Guernsey had become more competitive, the survey found, as had newer financial centres, such as Shanghai, Dubai, Qatar and Bahrain, among others.

The collapse of Northern Rock revealed flaws in the UK system of financial regulation. Other negative factors included the plan to charge non-domiciled foreign residents £30,000 (€39,000) a year to keep non-UK income out of the British tax net. The proposals would also make taxation of offshore trusts for non-doms tougher and reduce the number of days they can visit the UK.

The survey highlighted concerns about the overall British taxation regime, such as the crackdown on avoidance and more aggressive attitude to taxpayers.

City leaders campaigning against the proposals warn that they could undermine London's attractions as a financial centre.

A second survey published by the City Corporation says business leaders in London believe the UK's tax framework has become less competitive. Ireland, Switzerland, the Netherlands, Bermuda and Singapore were seen as the winners, with the UK tax regime regarded as increasingly unpredictable.