While Paris is expected to attract more jobs than other financial centres, the French capital has yet to prove itself as a location for European headquarters, according to the New Financial think tank. However, the European Union's "hard line" is likely to increase the number of people leaving London for the continent.
It's an alarming report that New Financial has just published on the consequences of Brexit. If its data is to be believed, 440 financial services firms have responded to the UK's exit from the European Union by moving some of their operations, staff or legal entities to the EU.
Created two years before the 2016 referendum, the British think tank points out that the figures are far higher than previous estimates. A similar report published in October 2019 by the same organization mentioned 330 departures already made or in progress. In March 2019, there was talk of 269 relocations. "We have identified over £900 billion of banking assets (approximately 10 % of the entire UK banking system) that have been transferred or are in the process of being transferred", counted New Financial in its latest edition.
102 transfers in Paris
According to the study, Paris attracted 102 of these entitiesThis includes the establishment of new European hubs in the capital (75) and the strengthening of existing teams (27). France ranks second in Europe, behind Dublin (135 entities) but ahead of Luxembourg (95) and well ahead of Frankfurt (63) and Amsterdam (48), despite the battles won by the latter in equity trading since the beginning of the year.
New Financial notes that Paris is Europe's only "other world city", that it is only two hours by train from London and that it has a large pool of expertise in banking, trading, insurance and asset management.
The report also gives a fairly optimistic outlook in terms of jobs for Paris, which should attract the largest number of people in the long term. Main employers mentioned: Bank of America, HSBC, Goldman Sachs, but also BNP Paribas and Société Générale.
Tax and labour market reform
The executive's efforts are highlighted: "The French government has worked to address the industry's main concerns, namely high levels of taxation and labour market rigidities. President Macron has focused on tax and labour market reforms, abolished the wealth tax and rolled out the red carpet for senior bank executives".
One caveat, however, in New Financial's report about the ability to attract corporate headquarters: "Of the 102 companies we identified as moving something in Paris, 27 are "secondary moves". This is the highest proportion of any major financial centre and a quarter of all the secondary moves we identified. This suggests that while many companies and their staff see Paris as an attractive city to live and work in, it is not seen as equally attractive as a location for headquarters or as a hub for European business".
Towards an increase in numbers
Without questioning the supremacy of the London market, New Financial believes that the movements of recent years should continue in the future and even talks about the "end of the beginning" of the process: "What is worse is that this analysis is almost certainly a significant underestimate of the reality: many companies will have slipped under our radar (particularly banks and asset managers that are already based in the EU). As the EU takes a "harder line" on the location of activities and individuals, we expect these figures to increase in the future"
Interviewed on Monday by the newspaper L'Opinion, Nicolas Mackel, CEO of Luxembourg for Finance, an agency promoting the Luxembourg financial centre, said: "It's true that we haven't seen any big flows yet. That's something that will come later, in my opinion."
In his letter to JP Morgan shareholders, CEO Jamie Dimon warned in early April that the Brexit would not be positive for the British economy, even raising the possibility of a transfer of the US bank's entire London operations.