The computer glitch at the London Stock Exchange could hardly have come at a worse time. After the US Government bailout of Fannie Mae and Freddie Mac on Sunday, traders were flooded with orders from clients to buy. With the exchange out of operation for most of the day, those traders were forced to disappoint their clients or to switch to one of the LSE’s rivals.

Worse still, Dame Clara Furse, the Exchange’s chief executive, wrote to the Financial Times yesterday declaring that the Exchange did not fear competition. By the evening, rivals were cracking open the champagne.

After a couple of hundred years as a virtual monopoly, the Exchange is suddenly facing the chill wind of competition. Two competitors have just opened up and another two will be ready to go in the next few weeks.

In a remarkable coincidence, the Intercontinental Exchange, the London market where oil futures are traded, also went down for an hour yesterday. These are not just blows for the exchanges. They will also add to concerns about London’s position as a financial centre.

London’s reputation for light but effective financial regulation took a battering over Northern Rock.

There have also been warnings that the Government’s tax policies could drive some financial businesses overseas. These were reinforced yesterday when it emerged that Krom River, an $810 million commodities hedge fund, had moved from London to Switzerland for tax reasons.

The one consolation is that the Exchange’s new rivals are based in London. But it faces a longer-term threat from international exchanges.

And it is worth remembering that while Britain has a great blessing in terms of its time zone - between Asia and America - it also has its drawbacks. The American chief executive of Wolfson Microelectronics, the British microchip maker, quit yesterday because he was homesick for California. The August weather can hardly have helped.

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