London consolidates lead in global foreign exchange markets-2

This year, deals transacted in London will account for 32.4 per cent of all foreign exchange trading, according to IFSL's analysis. The UK's market share is almost twice as high as the next biggest player, the US, which has 18.2 per cent of all currency trading. Japan, with 7.6 per cent, and Singapore, with 5.7 per cent, are the next most important currency exchange markets but lag considerably behind Western competitors.

The US and Japan have actually lost ground on the UK over the past two years, the IFSL's figures show, with their market shares slipping from 19.2 per cent and 8.3 per cent respectively in 2004. Britain's share has moved up from 31.3 per cent over the same period.

Mr Maslakovic said the UK had developed into the ideal centre for currency trading since Margaret Thatcher's newly elected Conservative government abolished exchange controls in 1979.

Until then, foreign investors were almost entirely prevented from buying sterling unless doing so would benefit Britain's balance of payments figures. UK residents, meanwhile, were not allowed to buy foreign currency for investment purposes, unless the purchases were funded with the sale of existing overseas assets. There were also tight restrictions on UK residents' ability to hold foreign currency in deposit accounts.