Last week Governor Pataki and Mayor Giuliani set up an authority to rebuild the 16-acre World Trade Centre site, devise strategies for coaxing businesses back and erect a suitable memorial reflecting the magnitude of the tragedy. As the smoke clears, however, it is becoming clear that many of the 616 companies that occupied the 10 million sq ft of office space in the twin towers, and dozens of other companies forced out of surrounding buildings that were damaged or destroyed, are not likely to return.

September 11th may, in fact, have hastened a process of dispersal that had been under way and could erode lower Manhattan's claim to be the world's financial capital.

Known simply as "Wall Street", the southern tip of Manhattan has been the place where financial companies simply had to be to do business since the day in 1792 when 24 pavement money traders met under a buttonwood tree to establish a formal exchange for buying and selling shares. It survived many setbacks, including a fire in 1835 that destroyed 600 buildings and a bomb in 1920 that killed 30 people.

In the 1920s, Wall Street surpassed London as the financial capital of the world. But its fortunes began to sink during the Great Depression. After the second World War, as swanky new office buildings began going up 60 blocks north in bustling mid-town Manhattan, the district became a byword for urban blight.

But through good times and bad, the great financial institutions remained tied to Wall Street, mainly because of a New York Stock Exchange rule, only dropped in 1980, that members must have offices there so runners could carry papers quickly to finalise trades.

In the modern interconnected world, it had become less important for finance houses to be clustered together. By the 1960s, most clients of banks and brokers were in midtown - where the restaurants were preferable to the sleazy fast-food joints around Wall Street. The financial companies began to follow them. In the 1970s, Morgan Stanley and Lazard Freres moved their main operations uptown, followed in the 1980s by Bear Sterns and First Boston.

Faced with a decaying financial district, the Port Authority of New York and New Jersey built the World Trade Centre. Finished in 1976, it was a white elephant at first, with dozens of floors remaining empty for years.

Lower Manhattan's fortunes improved with the completion in 1987 of the 8.5 million sq ft World Financial Centre on the Hudson. Its glass towers attracted three big names, Merrill Lynch, the world's biggest brokerage firm, American Express and Lehman Brothers.

The attack on September 11th set the stage for another major realignment of Wall Street brokerage firms. Though the financial centre suffered only superficial damage, the big three companies were evacuated and two may not come back. Lehman Brothers has bought a 32-story midtown building as its new headquarters. American Express has signed leases in New Jersey and has yet to declare its hand.

Merrill Lynch, which moved its trading operations to Jersey City, says it will come back eventually but is putting one-eighth of its space up for sublease.

A strong disincentive to return is the emotional aversion of employees to work beside Ground Zero. Of the 10 biggest companies that lost their offices in the twin towers, only Deutsche Bank has said it will return.

Morgan Stanley has transferred its 3,700 displaced employees to spare office space in midtown Manhattan, Brooklyn and Jersey City. Less than half the 114 businesses in damaged office blocks have said they will come back when they are repaired.

There is, in fact, spare office space downtown but most is old and not equipped for modern trading.

New York developer Larry Silverstein who holds the lease to the World Trade Centre has commissioned plans for four 50- to 60-story towers. The future of lower Manhattan may nevertheless be more as a residential rather than a financial district.

Forty commerical buildings have been converted into apartments in recent years because the owners could not find business tenants, and the resident population has increased from 15,000 to 25,000 since 1990. Several new high-rise apartment blocks have also been built and New York's first "green" high-rise apartment block is under construction.

By contrast New Jersey, a short ferry ride across the Hudson, tripled its Class A office space in the 1990s and is building more.

The New York Stock Exchange may even be tempted to go there. It threatened to do so in 1998 but was dissuaded by New York's promise of a new $560 million (€624 million) trading facility - which has yet to materialise.

Meanwhile, the Nasdaq Stock Market, which was evacuated from No 1 Liberty Plaza beside the trade centre, has found new office space in mid-town. "It just makes common sense," said Nasdaq chairman Mr Hardwick Simmons. "We'll plant our flag up here."