London Financial Services Companies Tempted by Parisian Skyscrapers
Paris is a tempting European city in itself, but when it comes to London’s financial services companies, it takes a bit more effort to try and lure them after Brexit. And, maybe, Paris has just discovered how to do it. By building seven new skyscrapers in Paris’s La Défense business district, French financial regulators are hoping to exploit Brexit uncertainty with the slogan: “Tired of the fog? Try the frogs!”
In order to “accommodate the new talent” coming to the city, Paris will build 375,000 sq m of office space by 2021. The new skyscrapers are part of a French campaign to attract London financial services and send a “powerful message to businesses that are uncertain about their future in London.” Paris’s business district advertising campaign, which has been circulating since October 2016, embraces national clichés like the frog, sitting in front of La Défense’s skyscrapers, with the message of choosing the Parisian district as the preferred location. The French are investing in the possibility that London financial companies might relocate part of their operations after Brexit and because of the ensuing loss of their passporting rights. La Défense is Europe’s largest business hub with 400 companies and 160,000 employees.
Marie-Célie Guillaume, chief executive of Defacto La Défense— the governing body responsible for managing the financial district in western Paris—said that “Brexit is bad news for Europe but it’s a fantastic opportunity for Paris and its business district. France is ready to welcome business and finance.”
Not only Paris, but Frankfurt, Warsaw, Luxembourg and Dublin are all competing for London’s insurers, banks, forex and other companies which are considering post-Brexit possibilities. According to the Financial Times, “Paris has been one of the most aggressive in its efforts.”
French authorities: “rolling out the red carpet” to bankers
Because Paris was never enamoured with high finance and economic growth has been slow, the government sees the Brexit vote as an opportunity for development. President François Hollande’s government has been generous towards foreign expats in Paris, announcing tax breaks and comprising a team to lobby international companies. French financial regulators have also promised to simplify the process of registering new financial companies in Paris, allowing for documents to be filed in English. Bank of France governor Francois Villeroy de Galhau said that he would quickly process applications from any British financial institution that wants to relocate in France. Talking to bankers, the head of the wider Paris region, Valerie Pecresse, said: "We are not in a war with London... but there is competition and we want to make Paris Europe's top financial centre.”
After the UK referendum, the French prime minister Manuel Valls, said: “We want to build the financial capital of the future . . . now is the time to come to France.” The deputy mayor of Paris, Jean-Louis Missika, was more excited: “We’ll be rolling out the red carpet [to bankers].”
Red carpets became a plaything among politicians fighting for the attention of foreign firms. British PM David Cameron was promising to “roll out the red carpet” for French firms, but after the Brexit vote finance minister Michel Sapin couldn’t help himself. He told reporters: "The red carpet can be used both ways".
But there are more expectations. Since London is the main currency trading centre, after Brexit it will lose its right to clear euro-denominated deals. Conveniently, Euronext, the European stock exchange, has an office at La Défense.
François Hollande has been calling for some time now for euro-denominated clearing to be moved outside London. One of the main concerns is the clearing of derivatives. For example, the clearing of swaps—a derivative contract between two financial institutions or businesses which exchange one financial instrument for another—is one of the City of London’s main financial exchanges. The two most common swaps are currency and interest rate swaps which help protect corporations and banks against currency and interest rate volatility.
Bankers in the UK and France are sceptical about Paris being the new financial centre, due to the language barrier, high taxes and the inflexibility of the French labour code. But, already, HSBC has confirmed its plans to move 1,000 roles from its London investment bank to Paris. JP Morgan Chase said that more than 4,000 of his bank’s 16,000 UK employees could be relocated.
If the skyscrapers aren’t convincing enough, maybe Emmanuel Macron, the independent French presidential candidate for May’s French elections, can change City financiers’ mind, since he is welcoming almost everyone—as long as you are carrying monetary and information capital— “banks, talents, researcher, academics” to move to France after Brexit. There will be red carpets, wine and cheese, and maybe seven new skyscrapers.