London and the European Union are waging a fierce battle for capital controls in Europe. New post-Brexit negotiations on finance are expected to be concluded next month. In the sights, the loss of the ‘European passport’ for institutions British companies in La City, the continent’s leading financial center.
According to the Banque de France, at least 2,500 jobs and 170 billion euros in assets have been relocated from the UK to France as part of Brexit. Paris has already hosted a hundred companies, according to the study by the consulting firm Knight Frank, which has analyzed all the movements linked to Brexit since 2016.
“Paris is in second position behind Dublin for obvious seasons of geographical, cultural and economic proximity. But Paris, which was rather behind Frankfurt and Luxembourg, today is truly anchored is in second position“, explains Vincent Bollaert, CEO of Knight Frank France.
The movements mainly concern finance, a sector which represents 7% of British GDP. The City of London has been a gateway to European markets, but new Brexit negotiations are underway and the battle promises to be tough.
Indeed, another Brexit agreement focusing exclusively on this forgotten sector of the first text found at the end of December must be concluded between the EU and London before the end of March. Several European capitals hope to take the opportunity to grab some shares of the huge British financial market.
Towards revocable equivalences
The agreement should offer British companies equivalences to the European financial passport, so that they can continue their activities. But these equivalences will be revocable.
“There are more than fifty agreements to be negotiated, which would allow Europe, in the event of unfavorable development or to consider as such in the regulations or the behavior of the United Kingdom, to suspend or eliminate the equivalences“, according to Didier Alleaume, financial services specialist and partner at Grand Thornton.
Limited and uncertain access, which could encourage further moves. “At the moment we see investment funds based in London coming to settle in Paris to seek support in order to develop their operations. Brexit is done, the movement is still ongoing, it remains to be seen how investors will support this movement. And that’s the story that will tell“, summarizes Didier Alleaume.
According to experts, London should remain the continent’s leading financial center. But other European capitals, including Paris, could take advantage of Brexit to climb in the world rankings.