Is an exodus from London to Paris on the cards?

London: Mark Boleat

Rolling out the red carpet is something more commonly associated with heads of state than bankers. 

However, since the UK voted in June to leave the EU, it is now part of a strategy that European financial centres are deploying to entice financial services firms to move from the UK to the continent. In particular, it is an approach adopted by our French cousins. The Brexit result might see some jobs move across the Channel, but London will remain the world’s leading financial centre. 

The European referendum in the UK did not go the way many businesses in the City of London expected, or hoped. It would be naïve to suggest some businesses and jobs will not go to our competitors. In the City, Goldman Sachs, HSBC and Morgan Stanley are among companies which have said this on record. Paris is gearing up efforts to attract businesses, in particular our euroclearing business. Frankfurt, Dublin and Luxembourg, along  with cities further afield like New York, Hong Kong and Singapore, are all doing the same. 

However, in the last few weeks we have seen signs which underline our strengths and demonstrate belief of overseas businesses in London remaining a stable financial centre. We have had the first corporate ‘masala bond’ issued outside India, with chancellor Philip Hammond calling it a “major vote of confidence in London”. We have seen Deutsche Börse shareholders give the go ahead for the merger with the London Stock Exchange. This would not have happened if there were concerns that London was showing major signs of weakness. 

There are a multitude of reasons why firms like basing themselves in London and the UK. Our banks’ assets are the fourth largest after China, the US and Japan, and we are the world’s largest centre for cross-border banking. 

Our capital hosts 40 per cent of the European headquarters of the world’s top 250 companies. Its nearest rival is Paris, with only 8 per cent. We have one the world’s best business environments and are sixth in the World Bank’s ‘Ease of Doing Business’ list. We are among the leaders in areas of the global economy like fintech, Islamic and green finance and RMB offshore trading. We have the world’s best legal system, flexible labour laws, world-class educational establishments and an attractive tax framework. To top this off, London is a place where people want to live and work. We even have 72,000 French-born residents. 

Financial services are a vital pillar of the UK economy, contributing more than £65bn ($85bn)  in taxes to the Treasury every year. Financial and professional services support more than 2.1m jobs. We are determined to hang onto these jobs and ensure  we maintain our number one position. London has thrived economically for centuries because competition is what helps keep us strong, helps us to be innovative, cutting edge and ahead of the pack.   

Paris: Didier le Menestrel

Paris or London? Between these two choices, many are unable to make up their mind. Each offers a multitude of advantages (architectural, culinary, artistic) and people on both sides of the Channel have learned to love these two cities with an almost equal degree of enthusiasm. Still, what would George Orwell , Charles Dickens  or Thierry Henry have done, had they worked in the financial sector and found themselves confronted by Brexit?

The new reality created by the British people’s choice to leave the EU presents them with a Cornelian dilemma. Do they believe in the capacity of Britain’s new political leaders to maintain London’s pre-eminent position in Europe? Paris has opened up its arms, more than ever in its history.

“Paris, the No. 1 financial centre” is an idea which will seem foolish to 100 per cent of readers. But it could become a tangible reality.

If London had all the trappings of the economic and financial capital of Europe, Brexit has fundamentally reshuffled the deck. In just a few months, the City will no longer have access in the same way to European markets or a fund passport. The umbilical cord of prosperity has been cut. I am confident in the creativity of British lobbyists to negotiate special agreements to retain preferential status. Nevertheless, the EU  will not miss this opportunity to recover some of the UK’s financial influence.

Paris continues to assert its own position. Europe’s second market for asset management, the City of Lights has considerable strengths: a rich ecosystem with 630 asset management companies (including four of the world’s top 20), a rich pool of talent coveted by trading floors and world-class quantitative research. 

Already Europe’s leader in equity and corporate bond markets, the Paris financial marketplace is rooted at the heart of a powerful economic hub and region representing nearly 30 per cent of national GDP and 4 per cent of European GDP, more than Greater London. 

All public and private stakeholders have come together around a common objective: establishing the city as the financial hub for a market of 450m Europeans. A working group, Frog (French Routes & Opportunities Garden), comprising asset management professionals and fintechs, was launched last February in association with the AFG  and the AMF, the French regulator. Already operational, it will issue recommendations to increase the competitiveness of the French asset management industry by removing obstacles. All the resources are ready to be deployed, pending overhaul of the tax system on which the public authorities, fully aware of the stakes, are working towards.

Attractive living conditions, a dynamic business environment, an ambitious and motivating industry working group project await. France is non-sectarian by nature: John Law, the Scottish economist forced to seek exile in France in 1715, found a country that allowed him to practice his financial theories and was offered the job of finance minister. 

Let us hope British adventurers of our time will know how to make the right choice: cross the Channel and write their own stories.