Report says firms in Paris, Frankfurt and Dublin are lobbying their governments to match London’s business-friendly environment and steal ‘low-hanging fruit’
London’s rival financial centres are lobbying their governments to support bids to steal tens of thousands of jobs from the City, according to a report on the impact of Brexit on the UK capital.
The report found that financial firms in Paris, Frankfurt and Dublin are pushing politicians to relax domestic business regulations and permit new office construction as they seek to steal “low-hanging fruit” from London.
Some of the fastest-growing areas of financial services in London could be lured abroad, along with back-office operations that are the backbone of an industry regarded as one of the most sophisticated in the world.
The report by the Political Economy Research Institute, based at Sheffield University, said clearing and asset management were the most vulnerable sectors. Around 80,000 jobs in London are associated with clearing activity, and 50,000 people are employed by City-based asset management firms.
Last week the EU’s council of ministers said in response to Theresa May’s letter triggering article 50 that it would only begin to negotiate a trade deal with the UK at the end of talks to agree a divorce settlement, leaving British businesses to guess the impact of Brexit for several years.
The report said the Irish Investment and Development Agency (IDA) had a five-year plan designed to add 10,000 jobs to the financial sector.
Arnaud de Bresson, head of Paris Europlace, a new organisation set up to attract innovative startup financial businesses to Paris, has estimated that the French capital stands to gain 10,000 “direct” posts in finance and fintech,” plus 10,000 to 20,000 in “law, accountancy and so on”.
The German research arm of the Helaba bank estimated that London could lose as many as 32,000 jobs to rival centres as firms move parts of their businesses and staff to maintain a presence within the EU single market.
A wide-ranging review of reports, research papers and press releases showed that the French government had come under intense pressure to match London’s business-friendly environment. The socialist administration has been urged to cut its headline corporation tax rate from 33% to 25% to close the gap with the UK’s, where corporation tax falls to 19% this month.
Banks in Germany, according to their own internal reports, have conceded that Dublin is ahead in the race to attract innovative financial startups, with low tax rates and an educated, English-speaking workforce. They have been lobbying Berlin for greater support to poach work from London.
Frankfurt hosts 74,000 financial services workers and is viewed as Europe’s second most competitive financial centre. But Paris hosts four of the EU’s top 10 banks, and claims 330,000 finance services workers and the mantle of the largest financial centre in the EU after Brexit.
Last week, it emerged that JP Morgan was considering buying an office in Dublin, with space for 1,000 workers. Lloyd’s of London has decided to set up a new EU subsidiary in Brussels.
The report said: “Alternative financial centres within the EU are well-positioned to take advantage of Brexit, in particular insofar as they might be able to secure activities, such as clearing, fintech and asset management which are now potentially vulnerable.
“Even if a relatively small proportion of the City’s activities are located to the EU’s alternative financial centres, this could have significant implications for the financial centres of the remaining member states. As an October 2016 Deutsche Bank report put it, ‘London’s crumbs could become Frankfurt’s pie’.
“There is clear evidence that policymakers and private actors within Frankfurt, Paris and Dublin are seeking to ‘capitalise’ on Brexit, whether directly through picking the ‘low-hanging fruit’ or indirectly through securing regulatory or tax reform in line with the business interest,” the report said.
The Brussels-based thinktank Bruegel, said earlier this year that the UK could lose 30,000 finance sector jobs as a result of Brexit, with 10,000 banking jobs and 20,000 roles in accountancy, law and consulting going abroad amounting to €1.8tn (£1.6tn) of income.
Last month Jeremy Browne, the City’s representative to the EU, said the number of job losses “is somewhere in the 5%, 6%, 7% scale. That’s quite a lot.”