© Institut Friedland
In the wake of Brexit, several European countries are competing to take business from London. About 10,000 banking jobs and 20,000 related professional services roles could be up for grabs. Dublin, Frankfurt, Paris and Amsterdam are among the front-runners, however others, such as Brussels, Luxembourg, Warsaw, Milan and Vienna could also benefit.
But what are the main criteria potential candidates have to fulfill in order to become the new London? Certainly, the ability to conduct business in English, which is essential for attracting a global workforce is key, but other factors, such as a favorable regulatory environment for employment, excellent transportation and communication infrastructure, the availability of prime office space, right down to the quality of housing, schools, restaurants and cultural attractions play their part. The race to replace London is on!
Frankfurt seems particularly well placed to seduce London finance. Woori, one of the biggest Korean banks, is the latest institution to jump ship for the German city. The Japanese investment bank Nomura and its competitor Daiwa did the same. As a signal of Frankfurt’s strong potential, Wall Street titan Goldman Sachs were set to double their workforce in Frankfurt by 200 people by the end of 2016. Already 80% of the 202 banks active in the city dubbed Manhattan on the Main are foreign establishments, with about 10,000 employees on site. “Brexit will bring between 3,000 and 5,000 new jobs to Frankfurt in the next two years,” stated Stefan Winter, head of Germany’s Association of Foreign Banks (VAB) in the Welt am Sonntag newspaper.
Paris, home to the European Securities and Markets Authority and several large banks, is mainland Europe’s only true global city. The City of Light has more big local banks, more big companies, more international schools and more cultural appeal than its German rival. British bank HSBC, has said it expects to move around 1,000 UK based staff to Paris, where it already has a subsidiary. In order to attract international business and capital, the French Ministry of Justice also intends to develop a legal framework to deal with international business litigation, with the creation of a specialized chamber at the Paris Court of Appeal, where it will be possible to plead in English and under British law.
Dublin is emerging as one of the most popular destinations for companies looking to cover their Brexit bases. The Irish capital appears to be the first choice for many City companies because of historic links with London and the common language. Furthermore, Dublin has an open business climate and a flexible tax regime. JPMorgan, which currently employs 500 staff in Ireland, has bought a new office building in the docklands area that can accommodate up to 1,000 people. Dublin’s main disadvantage is its relatively small size (1.8 million people in the metropolitan area) when compared to the aforementioned cities, and a lack of infrastructure.
With a strategic geographical position and a center of international commerce, Amsterdam is the perfect gateway to Europe. Thanks to Dutch people’s impressive grasp of the English language, good international schools and one of the best European airports, Amsterdam is an authentic business location and a realistic alternative to London. Fintech and high-frequency trading are Amsterdam’s most attractive sectors and one of the city’s greatest advantages is its excellent digital connectivity. In 2016 Japan’s biggest bank, the Mitsubishi UFJ Financial Group, expanded to Amsterdam using personnel from London, and indeed the city now serves as the headquarters for all its continental activities. Other financial institutions could be considering similar moves.
Despite its size, Luxemburg is a truly international financial center specialized in cross-border business and as a consequence, is an ideal location for businesses looking to relocate from London. The country’s other advantages are its political and economic stability and lack of social unrest. The insurance giant RSA chose to open a new office in the Grand Duchy in response to Brexit, as did AIG, Hiscox, Lloyd’s of London and the private equity firm Blackstone.
Despite intense competition from these candidates, it is highly unlikely that London-based companies are going to pack up and move to another city, but, instead, decentralize activity to a European Union market and have sector-based hubs in several locations.