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REGIONS EUROPE


Fivecities vying for London’s glory


AS LONDON STEPS DOWNAS THE EU’S FINANCIAL CENTRE, OTHER CITIES ARE STEPPING UP. DANIELLE MYLES REPORTS


jostling for the attention of the finan- cial firms that would be forced to move headquarters. Brexit puts an end to London’s passporting rights, which allow firms to service clients


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across the EU, and to the city’s undisputed reign as the bloc’s leading financial centre. Predictions that London would be replaced


by specialist financial hubs, rather than a sin- gle city, are coming to fruition. As the Brexit transition period comes to an end, most firms have moved their EU headquarters to Paris, Amsterdam, Frankfurt, Luxembourg or Dublin. But there is stillmuchto play for. Brexit has laid bare these cities’ strengths and weaknesses, revealing which are primed to capture new business. And while several banks tell fDi they have split activities across multiple cities to build on existing operations, others suggest they are hedging their bets. “We are very aware that this might not be


the endgame. Some firms have really prepared themselves to seewhere they can getmore scale and where, in the end, the business builds up sufficiently,” says Andreas Prechtel, managing director of the Association of Foreign Banks in Germany. “The competition between these cit- ies is still ongoing.”


The generalistandits sidekick Paris’s charm offensive to lure UK business was second to none. France cut its 33% corpo- rate tax rate to 25%, amid a slew of other pro- business reforms. “Since Brexit, regulatory authorities have developed fast-track proce- dures to welcome international companies in Paris,” says Arnaud de Bresson, chief executive of the lobby group Paris Europlace. “It now takes two months to open a securities or asset management company. Historically, it took a lot longer.” Until the 1990s, Paris hosted most US


firms’ European headquarters, and the likes of JPMorgan, Citi and Goldman Sachs are now ramping up local operations. Research by think tank New Financial shows that France’s lending, insurance and corporate bond mar- kets are bigger than the UK’s, and that it will host 24% of EU capital markets activity — more than any other country. It is supported by local universities, whose finance and math- ematics credentials see the French dominate


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ithin days of the UK voting to leave the EU in June 2016, cities across the bloc started


trading desks around the world. Paris’s ties withAmsterdam are set to grow,


as the Dutch capital has emerged as the EU’s new exchanges hub. The London Stock Exchange, MarketAxess and Chicago’sCBOEare among the trading platforms moving UK-based EU operations to the Dutch capital, which was already home to the headquarters of Europe’s biggest stock exchange, Euronext. Since 2016, both cities have climbed up the


Global Financial Centres Index (GFCI) pub- lished by think tank Z/Yen; Paris from 32 to 18, and Amsterdam 33 to 22. But they still trail two other EU cities.


Banking’s heartland One of them is Frankfurt, which ranks a steady 16th. NewFinancial has tracked the Brexit relo- cations of 332 finance firms and found that 45 chose Germany’s financial centre — three-quar- ters of which are banks. Home to the European Central Bank, the city’s regulatory prowess has been a major drawcard. Two banks tell fDi the experience and expertise of financial watchdog BaFin was a key factor in choosing Frankfurt as their EU hub. However bankers have not moved en masse


to the city, and some query if it will be banks’ headquarters in name only. Michael Mainelli, executive chairman of Z/Yen, disagrees. “Headquarters are centripetal,” he says. “If that is where the politics are happening in the cor- ridors, it will attract business.” Banks aside, hosting Europe’s biggest inter-


net exchange point is helping the city attract firms not weighed down by legacy IT systems. “It makes Frankfurt a good place to start a busi- ness using the newest digital and cloud ser- vices, and it has drawn a variety of financial infrastructure firms,” saysMr Prechtel.


Dark horse With little fanfare, Luxembourg has become the second most popular destination for Brexit relocations. Of its 71 businesses, the majority are asset managers, hedge funds and private equity funds — many of which were already domiciled in Luxembourg but man- aged out of London. Luxembourg is the world’s second biggest fund centre, beaten only by the US, and Brexit has allowed it to climb the value chain by adding portfolio management to its activities. The country is focused on what it does best. “We aren’t a trading hub and we aren’t an


www.fDiIntelligence.com December 2020/January 2021


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