EU cities vying hard to attract London’s business

While the UK’s political parties are in a turmoil amid resignations and disagreements, Prime Minister Theresa May remains hopeful of negotiating necessary tweaks to the draft withdrawal agreement with the EU to enable parliament to accept the final terms of leaving the bloc. But behind the scenes another battle is going on, with well-funded campaigns vying to attract business from the financial district (known as the ‘City’) of London.

European cities have been on a charm offensive to attract City jobs. After more than two years of to and fro, a picture is emerging of which locations across Europe will be the winners as companies establish new entities on the European mainland.

The government had adopted the Bank of England’s estimate that 5,000 jobs will likely leave London because of Brexit, and more roles will be created abroad to service client needs.

With just over a month to go until Brexit, the vast majority of firms now have plans in place to prepare for the worst possible outcome in their eyes — no deal — and have set about creating the structures to continue running their European operations when they lose their coveted Single Market passport. Among the cities competing for the UK’s business, Frankfurt emerges as the gainer on the banking front, with several banks preferring the German financial capital – ahead of Paris, as the base for a new office or subsidiary.

Managing director of Frankfurt Main Finance, Hubertus Vaeth, puts the city’s choice with the banks down to a targeted approach. He said: “We understood that we had very little chance with asset managers and we would not be the prime position for insurance.”

Instead, the lobby group focused immediately after the referendum in June 2016, on Japanese and American banks in particular, the objects of tailored presentations.

For France, Brexit has coincided with another political shift, a change in party politics, albeit one from the centre ground. Although highly critical of Brexit itself, President Emmanuel Macron has nevertheless has used it to try to build up Paris as a financial centre. Macron, a former Rothschild and CIE banker, is personally invested in the efforts to attract business. At one meeting including the bosses of some of the world’s biggest global asset managers Macron singled out chief executives and challenged them on their reasons for not basing more operations in Paris.

Fast-growing fintech firms such as London-based banking services unicorn Revolut, have also been approached by the French government, pitching directly for businesses to relocate or choose Paris as an investment destination. Other cities, smaller financial centres have had to go for more niche – but still important – aspects of the business concentrated in London.

Luxembourg, for instance, positioned itself as the centre for fund management, although it went for a more understated approach than rival public relations campaigns. Chief executive of Luxembourg for Finance, Nicolas Mackel, said his conversations with firms centred on political and economic stability, while also emphasising an ongoing relationship across the channel, rather than wholesale business moves. “We already had a very strong relationship with London. We understood very early on that firms weren’t going to move entire operation,” he said.

Amsterdam had chosen to leverage its credentials as a data transfer hub, targeting exchanges whose clients value millisecond advantages. It also offered extensive tax breaks for expats – although bonuses are capped at only 20 per cent of salaries.

CBOE Global Markets, Nex Exchange, Tradeweb and Marketaxess and the London Stock Exchange Group had all chosen the city as a location for extra numbers, although it didn’t all go their way.

Dublin, meanwhile, has made some headway among asset managers, with Ashmore and Bailie Gifford the latest to join a line setting up new operations across the Irish sea, which includes Standard Life Aberdeen, Legal & General Investment Management, Hermes Investment Management and Legg Mason. Kevin Sammon, director of global corporate communications at IDA Ireland, the Irish development body, said around 40 companies in all have wanted Dublin.

There remains little clarity on what the future UK-EU relationship will look like. Much depends on the accepted final withdrawal agreement that the beleaguered

Theresa May is pressured to come up with. European lobbying groups insist they want to work closely with the UK after Brexit, even if that sits uncomfortably with their desire to target core areas of London’s financial district’s business. (The author is our foreign correspondent based in the UK. He can be reached at andyjalil@aol.com)