Officials from Paris made a pitch for financial firms thinking of moving staff or operations to continental Europe post-Brexit to consider moving to the French capital at an event in London last week.
“Brexit is an earthquake,” said Jean-Louis Missika, Vice Mayor of the City of Paris, at the event, Europe – Where To Next? Winning Business Strategies in the Eurozone. He continued: “Brexit is a slow earthquake and it will reshape the economic and financial landscape in Europe.”
Missika added that right now political and regulatory authorities, as well as corporates and financial companies, are trying to figure out what this new landscape will look like.
The suspicion though, is that if Britain goes for a “hard Brexit” that some firms might either move existing business personnel or interests to continental Europe or open up affiliated or subsidiary businesses on the continent.
“We understand that international companies and financial institutions cannot afford to wait any longer before they make investment decisions,” said Gérard Mestrallet, chairman of Paris Europlace, who explained that firms need to move now in order to reduce the uncertainty around their future business operations.
One theme that the speakers were all keen to emphasise was that, in pitching to UK businesses, Paris is not trying to put itself in competition with London as a global and financial business hub.
“Of course London is, and will remain, a large global financial centre, but we are here to propose win-win solutions,” said Mestrallet.
Patrick Ollier, president of the Greater Paris Metropolis added that “it’s not a competition against London”, but rather that as Brexit becomes a reality, France wants to be ready to welcome companies that might want to move there.
Similarly, Missika stated: “I insist on this point: we are not here to steal business from London, we are here to see how we can reorganise the business of the financial industry together. We are here to build bridges.”
Missika noted that the mayor of Paris, Anne Hidalgo, and the mayor of London, Sadiq Khan, have publicly called for greater cooperation between the two cities post-Brexit, and he touted about the possibility of creating “a megalopolis” between these two cities.
However, this idea of cooperation between these two cities that currently look set to end up on different sides of the Brexit divide appears to be at odds with some of the political rhetoric being used at the national level.
For example, British prime minister, Theresa May, has publicly suggested that Britain could change its tax laws to make it more competitive in attracting business should the EU members try and enforce an unfavourable Brexit deal upon the nation.
When Profit & Loss pointed this out to the speakers at the event, Missika simply responded that “it will be very difficult to decide to make London like Panama City”.
Meanwhile, Valérie Pécresse, president of the Paris Region, said that France would not get involved in a race to the bottom with regards to its tax regime.
“We are not running that race. In France, we have public services, we need to have normal taxes that are around the average of the EU,” she said.
Rather than viewing Paris as in competition with London for financial services business, it is clear that the speakers instead see the main competition coming from other major cities on the continent.
“This [Brexit] vote opened up fierce competition between the main cities of continental Europe and it is because of this competition that we came to tell you about the assets that we have,” said Pécresse.
“Apart form London, [Paris] is the only one global city in EU in terms of size and economic weight, and it is backed by the fifth largest economy in the world. According to market data, Paris is by far the largest financial centre in continental Europe,” said Mestrallet.
He noted that asset managers in Paris already manage over 30% of the assets in continental Europe, almost twice as much as Germany, where 16% of assets are managed.
In addition, Mestrallet pointed out that in terms of corporate and investment banking, four of the six largest banks in continental Europe are French, while the other two are German and Spanish. He claimed that France’s insurance sector is the second largest in continental Europe and that its private equity sector is the largest in the region, attracting twice as much in investment as the German private equity sector.
Another factor that Mestrallet argued will make Paris more attractive to firms in Britain looking to move to continental Europe is changes to its tax laws, approved last year. The corporate tax rate is currently 33% – which Mestrallet said is comparable to Germany – but is set to be reduced to 28% by 2020, which Mestrallet said would put it on par with most other European cities.
“The higher income tax bracket of 38% on incomes over 300,000 euros is very competitive in Europe, even before taking into account the lower rate of 28% for in-patriots, giving France the most attractive income tax in the EU,” he commented.
The “in-patriots” scheme is designed to reward ex-patriots who relocate to France after working abroad with a lower tax bracket in order to try and bring back talent to the country.
“Paris offers the best opportunities to financial firms that would consider relocating some of its activities to the EU. We are not here to force financial institutions to leave, that will be their decision. But if they come to the conclusion following Brexit that they would like to move some of their activities somewhere, our message is: come to Paris,” concluded Mestrallet.
In some regards, the elephant in the room throughout the whole pitch was that Marine Le Pen, who leads the right-wing National Front party in France, wants to take France out of the eurozone and has advocated taking a more protectionist approach to the French economy.
This would clearly not be consistent with the pitch put forward by French officials, who touted relocating business to Paris as a means of accessing continental European markets more freely in a post-Brexit environment.
The latest data from pollsters Ifop and BVA predict that Le Pen will get through to the second round of the French elections before losing to former economy minister, Emmanuel Macron. But given that major polls were wrong about the outcomes of both the Brexit referendum and the US election last year, there could be valid concerns around the ability of these polls to accurately predict the result of the French election.
If the speakers at the event shared this anxiety, they were certainly determined not to show it.
“Of course there is a level of political uncertainty in France at the moment, but this uncertainty will be lifted in three months. In three months we will have a new president of France and I am sure he will be pro-business and open to the world,” said Pécresse.