Feb. 29 (Bloomberg) -- London's lead over New York as the top global financial center narrowed, partly because of proposed income-tax changes and the collapse of Northern Rock Plc, a report for the U.K. capital's business district found.

London had a score of 795 points this month, down from 806 in September, with high marks for business environment, market access and infrastructure, according to the report, written by consultant Z/Yen Group and published yesterday by the City of London. New York lost 1 point, scoring 786.

New York ranks highly in all areas except for ``burdensome'' regulations for businesses, the study found. The authors added that a U.K. government proposal to raise more tax from foreigners living in Britain would have a negative impact on the City district, where 350,000 people work.

``London's lead is being squeezed and there is no room for complacency,'' said Michael Snyder, policy chief in the City of London. The City published a separate report yesterday saying U.K. corporate and business taxes are hurting the competitiveness of the country's financial services industry.

Financial and business services make up the biggest piece of the London economy and generate about 14.5 percent of the country's gross domestic product. The government took control of Northern Rock after a run on the bank's deposits last year.

Competitiveness Report

London-based Z/Yen compiled the competitiveness report using 1,236 responses from financial-services professionals to an online questionnaire, as well as ranking cities on factors such the availability of skilled personnel, access to international financial markets, business regulation and infrastructure, taxes and quality of life.

Following London and New York are Hong Kong (695 points), Singapore (675), Zurich (665) and Frankfurt (642).

Dubai (24th with 585 points), Shanghai (31st with 554) and Singapore were identified in the report as the cities that will become ``significantly more important'' in the next two or three years. Bahrain (39th with 514) and Qatar (47th with 491) had the biggest gains since September.

To contact the reporter on this story: Brian Lysaght in London at blysaght@bloomberg.net.

Last Updated: February 29, 2008 08:20 EST