Paris faces Frankfurt in Brexit finance jobs competition – POLITICO
PARIS – Here’s a message from the City of Lights: don’t believe the hype that Frankfurt is sweeping all financial jobs out of Brexit.
With 20 banks already signed up to move staff to Frankfurt, the city is widely seen as well ahead of Paris, Amsterdam, Dublin and other cities vying to attract the financial sector that will be leaving London due to Brexit.
Lobbyists for the German City of Glass and Steel point to the presence of German and European central banks, an English-speaking regulator and nearly a dozen new high-rise buildings as major assets for financial firms seeking to to establish itself on the continent.
While the deal looks solid, Paris boosters claim it has a lot of holes as well. Most of the banks that have promised to move to Frankfurt, they point out, are only talking about establishing a legal seat there, which can be accomplished with minimal staff. It is not the same as moving an entire trading floor.
The main post-Brexit decisions on move operations are yet to come, with estimates of the number of jobs that will be affected ranging from 30,000 to 230,000 depending on the outcome of negotiations between the UK and the EU. When banks shift greater resources, especially for their business operations, supporters of Paris say they will pay attention to surrounding financial conditions – and balk at concerns about the German banking sector.
Then there is the relative size and prestige of Paris compared to Frankfurt. The former has a population of 10 million and the economy of a global metropolis comparable to London and New York, while the latter is a promising seat for central banks with a population of 730,000.
“We have a rather distorted image of Frankfurt as the handily winner of this race for Brexit jobs” – Arnaud de Bresson, Managing Director of Paris Europlace
Germany may have more attractive tax and working conditions, but the new French president, Emmanuel Macron, is forging ahead with plans to make France competitive. It plans to remove the highest bracket of payroll tax for banks and other companies that do not pay VAT and to cancel a planned extension of the tax on share swaps. Macron has also pledged to ensure that bonuses are not taken into account when labor courts decide unfair dismissal compensation.
The catch: don’t count Paris.
âRight now we have a pretty distorted picture of Frankfurt as the handily winner of this Brexit jobs race,â said Arnaud de Bresson, chief executive of Paris Europlace, an organization that promotes the city as a financial center.
âBut when we start talking about relocating entire trading teams, important staffing decisions, Paris is still a serious competitorâ¦ We are confident that in the short to medium term, the benefits of Paris will start to show. show through in a convincing way, especially compared to Frankfurt, âhe said.
The Frankfurt Achilles Heel
The strengths of Frankfurt on paper allowed the German city to get ahead of its French rival by winning commitments to settle there with the big banks. Its official bid to host the European Banking Authority – the EU’s banking regulator – submitted on Monday emphasized the city’s dominance in financial market supervision as well as its growing banking clientele.
“When it comes to doing business with customers, Frankfurt is where the customers are,” Michael Horn, spokesman for Hessian Minister of European and Federal Affairs, said in July.
The American bank Citigroup, the British Standard Chartered and the Japanese Nomura are among those who have decided to make Frankfurt their legal base.
But Bresson says the devil is in the word “legal”. Many of those decisions, he said, can boil down to opening a head office with a handful of employees in order to have a presence on the continent, not a full-blown mall.
âWhere your legal entity is based is not where your employees are based,â said Jamie Dimon, Managing Director of JPMorgan. said in July at a conference in Paris. “People could be in Paris, the Netherlands, Madrid or anywhere in the EU. We haven’t decided yet.”
Among the banks engaged in Frankfurt, Citibank is relocating around 200 employees. In contrast, HSBC announced in January that it would move 1,000 trading employees to Paris. Added to the commitments to repatriate the staff of a large number of French banks including SociÃ©tÃ© GÃ©nÃ©rale and CrÃ©dit Agricole, Paris appears only slightly behind Frankfurt on the job changes already announced: the first recorded 2,500 against 2,800 , according to the calculations of Paris Europlace.
30 other financial institutions, including major Asian and American banks, are in talks with French regulators to move to Paris, according to Europlace.
Overall, the Bruegel think tank believes that some 30,000 jobs could move to the mainland from the City of London if Brexit becomes a reality, while others put the figure much higher. This means that the process has only just begun. When big decisions come, banks will look at a range of factors, including the health of a country’s banking sector.
Here France has the upper hand, Bresson said. “Commerzbank is in a delicate situation, Deutsche Bank has difficulties internationally, and then there are the Landesbanks, which also have problems,” he said. “This shows that there are difficulties within the system, which could create term problems for interbank lending for financial companies.”
French banks, including four in the European top 10 in terms of size, are not a lingering concern for regulators. Intensive business activities mean that there is deep expertise among regulators. And contrary to some claims by rivals, they inform potential customers in English.
“The big difference between Paris and Frankfurt in terms of regulation is that Paris has greater expertise in terms of market activity than the German authority”, said Bresson.
France is changing
For now, Germany has a lower corporate tax rate than France (29.7% vs. 33.3%). But the French rate should fall to 28% by 2020. On July 7, Prime Minister Edouard Philippe implemented a series of other measures intended for Brexit banks, in particular the abolition of the upper bracket of the tax on wages for workers in the financial sector.
“Only Paris and its district of La DÃ©fense can offer a viable alternative to businesses established in London” – Marie CÃ©lie Guillaume, head of Defacto
Rigid labor rules have long been a concern of foreign banks considering doing business in France, an issue HSBC chief executive Stuart Gulliver pointed out in July. The planned reforms were “very positive”, but the banks wanted to see if Macron would be able to carry out his agenda and if he would be able to defend it in a second term, Gulliver said.
Yet Macron is moving forward with changes to the labor code, with a series of executive decrees due to be published no later than the end of September, according to Philippe. The president, himself a former Rothschild banker, is determined to make France a Brexit winner and is investing in efforts to lure bankers to Paris.
One of the main draws of Paris is that it is a more attractive place to live, with a culinary and cultural scene rivaling that of London and satisfying finance workers with big portfolios. The city also has plenty of space to accommodate an influx of bankers, with seven new skyscrapers expected to be built in the La DÃ©fense business district by 2021, representing 375,000 mÂ² of new offices.
“Only Paris and its district of La DÃ©fense can offer a viable alternative to businesses established in London, whether in terms of the economic environment or lifestyle for workers”, said Marie CÃ©lie Guillaume, director of Defacto, l company that promotes La DÃ©fense.