Continental competition to benefit from Brexit is rapidly heating up as half a dozen EU cities vie to attract London-based banks and financial services companies worried about losing their access to the single market.
From Paris to Vilnius, Milan to Madrid and Frankfurt to Valletta, regulators, local authorities and sometimes national governments are clearing a path for the exodus many feel is coming as Theresa May’s deadline to start negotiations nears.
Each has its plus points – liveability, connectivity, reliability. Each also has its drawbacks: too provincial, difficult language, inflexible labour laws. What all have in common is a desire to cash in.
The prize is certainly substantial: estimates of how many of the City’s 350,000-plus finance jobs could move to the continent if London loses passporting rights that allow a UK-licensed firm to trade across the EU have ranged from 35,000 to 70,000.
But the politics are awkward. With populist, anti-EU parties set to fare well in elections in France, Germany and the Netherlands this year, governments are understandably wary of being seen to bend the rules for bankers.
“There’s a limit to what any of us can realistically do,” said one trade official at an EU embassy in London. “Of course everyone wants a slice of the City pie. But there aren’t many votes in giving special treatment to financiers.”
Most aggressive – and ambitious – is Paris. Long jealous of London’s dominant role in EU finance, the French capital sees Brexit as a unique opportunity if not to take over from the City, at least to redress a historic imbalance.
Vaunting an enviable quality of life and a sizeable finance sector of 180,000 workers, Paris, home to some of Europe’s largest banks and the Euronext Paris stock exchange, hopes to snaffle 20,000 City jobs, its lobby group Europlace said.
France’s finance watchdog and securities regulator have done their bit: London-licensed operators can now get “pre-authorisation” to open in Paris within a fortnight and even do the paperwork in English.
As part of the same government-backed red-carpet rollout, Paris has also pushed through one of the EU’s most generous expat tax regimes, including tax breaks of up to 50%, in the hope of pulling in international high earners.
But while France has plainly moved on from the days when François Hollande could say his true enemy was “the world of finance”, major players remain wary of the country’s rigid employment laws.
The government is reportedly exploring possible workarounds, including a special hiring-and-firing regime for banks in specific EU classifications, but it remains an extremely sensitive subject.
Frankfurt faces a similar problem. Home to the European Central Bank, the Bundesbank, the EU insurance authority and Germany’s financial regulator, it sees itself as a stable, sensible and respected European financial hub.
While not as aggressive as Paris, the state of Hesse is reportedly also exploring ways to change strict German worker protection rules so banks could fire high earners as easily as they can in London – although Berlin has signalled it does not agree.
Frankfurt, which is seeking partnership with London rather than competition, must contend with its perception as a drab place to live: finance workers used to London may see Paris or even Amsterdam as more appealing than a provincial German city with fewer than 700,000 inhabitants.
Highly competitive on tax, and unhampered by continental labour laws, Dublin is a serious contender. It boasts the EU headquarters of Google, Facebook, Twitter and LinkedIn, plus subsidiaries of more than half the world’s leading financial services firms, according to its International Financial Services Centre.
The city’s pitch is also based on its belief that as the EU’s only English-language country, it is an obvious choice. Insurance companies in particular have already begun setting up subsidiaries, and Ireland’s Industrial Development Agency says more than 100 financial services companies have shown interest.
It, too, has its drawbacks: the city suffers from a serious shortage of quality residential and commercial property for rent. But the government is determined, unveiling in its budget last autumn a full-blown Getting Ireland Brexit Ready programme, including tax relief for foreign firms relocating staff.
Appealingly low-tax Luxembourg, home to 143 banks with assets of some €800bn and the EU headquarters of companies such as Skype and Paypal, bills itself as “the only country that still loves bankers” and has also reported strong interest from international financial services firms exploring post-Brexit options.
Also in the race is Amsterdam, home to the EU offices of Uber, Tesla and Netflix as well as one of the world’s largest data transport hubs. It is unashamedly going after sectors such as fintech, high-frequency trading and above all London’s euro clearing business.
The Dutch capital hopes its central European location and advanced digital infrastructure will attract heavily tech-reliant financial services firms that will prove a better fit for Amsterdam’s relatively sober financial culture.
The Netherlands has been notably tough, for example, on bankers’ bonuses, which are limited to 20% of salary, and unequivocal (in the form of a speech by finance minister Jeroen Dijsselbloem) about the fact that it is not out to attract Wall Street or City-style excess – a stance some may not appreciate.
While hardly among the frontrunners, several other cities are also seeking a slice of the Brexit cake. Madrid’s #ThinkMadrid campaign – based on affordable housing, a relatively cheap, well-qualified workforce, lenient labour laws and plentiful sunshine – aims to attract some of London’s back-office functions.
The Spanish capital claims it has more vacant office space than any other major European city except Paris – plus a mere 58 days of rain a year, compared with 111 in Frankfurt, 129 in Dublin, 164 in Paris and 185 in Amsterdam.
In Italy, Milan is also making a pitch, particularly for technology and financial firms, with ambitious if probably unrealistic plans to turn the Expo 2015 space into a global tech hub.
Small, user-friendly Valletta, in Malta, fancies some insurance business, while Lithuania’s Vilnius and Riga in Latvia, want a share of fintech and support activities. “We have the talent and we have the infrastructure,” said Latvia’s finance minister, Dana Reizniece-Ozola. “Everyone wants to put themselves on the map.”
In reality, of course, most industry observers expect no single European city to hit the jackpot. Instead, if the UK finds itself outside the single market and without a special deal, financial services firms with major City operations will move some jobs and selected activities to a range of EU locations. Everyone could be a winner.
