New York’s status as the world’s financial capital is under threat from a surge in red tape that could starve America of as much as $30 billion in revenue within four years and relegate the city to a regional marketplace.

The bleak outlook was outlined in a doom-laden report written by McKinsey & Company, the management consultancy, and commissioned by New York’s City and State governments.

The findings were revealed by Michael Bloomberg, the Mayor of New York, Senator Charles Schumer of New York, and Eliot Spitzer, the recently elected Governor of New York State and the former New York attorney-general.

The report, written after McKinsey spoke to more than 50 chief executives from the financial services industry and 350 other experts, found that the cost of implementing regulations contained in the Sarbanes-Oxley Act was driving foreign investors away from the United States.

The report also claimed that immigration policy, which has been tightened significantly in the five years since the terrorist attacks of September 2001, was stifling innovation in financial services, as companies are unable to bring in the best talent from overseas because of visa restrictions.

It is also claimed that the high risk of litigation in the United States was driving business to less litigious marketplaces, such as London.

Furthermore, New York is not the only marketplace in the US that will suffer. The report found that six other states rely on financial services for more than 10 per cent of their income, a lot of which could be lost if policy and regulation are not drastically changed to improve competitiveness.

Mr Schumer said: “If New York goes from being the financial capital of the world to becoming only a regional market, as this report predicts will happen within the next ten years, every aspect of New York life will suffer, not just financial services.”

The US accounted for 20 per cent of all IPOs last year, down from 35 per cent in 2001, according to the Financial Services Forum, a group that represents banks and insurers. The report urges the Securities and Exchange Commission to limit legal liability for foreign companies listed in the US. The report also suggests that foreign companies that fall under the jurisdiction of SEC-approved regulators in other countries be exempt from Sarbanes-Oxley requirements.

What's wanted

Look into creating a special international financial services zone to benefit overseas comapnies James Doran New York

Explore Law

• Columnists

• Law Panel

• Law Reports

• Student Law

Times Recommends

• BGC 'set aside £40m to lure Tullett brokers'
• Legal aid review to ensure value
• Fears as 21 magistrates' courts face closure