London is the first European financial place, but the French authorities dream that Brexit will allow Paris to take away the leadership. However, it remains to be seen whether, after the negotiation between the United Kingdom and the EU, the London City will lose access to European markets.
The French Minister of Economy, Bruno Le Maire, said this week that “Paris is becoming the first financial place” of the continent, what more than the finding of a reality, hitherto difficult to verify, is a declaration of intent.
Financial services represent around 7% of British gross domestic product (GDP) and are essentially concentrated in London, where 250,000 people are directly employed.
In the French capital there are 180,000 jobs, according to the agency that represents their interests, Paris Europlace.
Its general director, Arnaud de Bresson, emphasizes that Paris occupies the first position of the new European Union reduced to 27 member countries by Brexit, well ahead of the 70,000 in Frankfurt, 30,000 in Dublin and many others in Luxembourg
Paris is not only the leader of continental Europe in terms of market capitalization, but also as an asset management center, in the derivatives business and in the insurance market.
THE PARIS BAZAS
For De Bresson, there are several reasons that explain it, starting because in the Old Continent Paris “is the only other global city comparable to London.”
In the context of the exit of the United Kingdom from the EU, which was formalized this Saturday, between 80 and 100 companies in the sector have decided to transfer some 4,000 direct jobs from London to the Paris region and “probably” that process “is can accelerate, “according to the manager.
Like the French Government and the president, Emmanuel Macron, Paris Europlace insists that the withdrawal of the United Kingdom from the Union is not good news, but a reality with consequences. Le Maire went further by stating that the French economy “must take advantage of Brexit.”
At the moment it is true that he has already done so, for example, with the transfer from London to Paris of the European Banking Agency (EBA) and its 250 employees, who come to join another regulator, the European Securities and Markets Authority (ESMA), which was already based in the French capital.
Since the June 2016 referendum in which the British were pronounced mostly out of the EU, there have been announcements from business banks such as HSBC, Bank of America, JP Morgan, Morgan Stanley or Goldman Sachs that have announced a reinforcement of their troops in Paris.
But few speak directly of activity transfer from London.
HSBC states that its subsidiary in France has acquired a series of activities in the Netherlands, Italy, Spain, the Czech Republic, Ireland and Luxembourg. And remember that the operations in these seven countries were based on the European passport from which the United Kingdom-based entities have so far benefited.
The British bank says that despite its intention to “minimize changes”, that subsidiary in France reinforces its offer of products and services, as well as its equipment there (without giving figures), aware that its customers in the European Economic Area may they cannot be taken care of in the future from London.
UNCERTAINTIES FOR 2021
Behind these wired formulas is uncertainty about what the relationship between the United Kingdom and the EU will be once the transition period ends in January 2021.
Because until then, that country will continue to belong to the customs union and the single market, its access to the financial services business is guaranteed and there will be no direct economic impact.
As the analyst of the S&P rating agency Aarti Sakhuja explains, “the last three and a half years have been the easy part, despite all the political disputes,” and it is now in the talks between London and Brussels that the stakes are at stake. What will happen in the future.
For S&P, there is a more than obvious contradiction between the interest of both parties to avoid a fracture of the financial markets, and the declared will of the British Government to be free to negotiate trade agreements with third countries.
And he warns that the more he separates from EU regulations, the higher the costs will also be for his financial sector when trading with that block.