Since 2016, nearly 7,500 jobs have been transferred - or are in the process of being transferred - from Great Britain to Ile-de-France, according to figures from Choose Paris Region, the agency in charge of promoting the region. And of these, 47% involve companies in the financial sector.
 
Out of 369 projects currently under development, 184 have already made their decision to set up in Paris Region, with the prospect of nearly 5,000 confirmed jobs, including 3,500 direct jobs for financial projects. Some 133 others are still under consideration, with around 2,500 jobs at stake. Finally, 52 projects are related to another destination.
 
"The momentum is accelerating in favor of Paris at the beginning of 2021. It concerns first of all large banks such as Bank of America, JP Morgan, Goldman Sachs and also Citigroup, which are increasing their teams a little more than what was planned at the beginning of the year 2021. Other British, Chinese and Canadian international banks are also strengthening their teams," notes Arnaud de Bresson, General Delegate of Paris Europlace, the organization in charge of developing and promoting the Paris financial center.
 
Paris is doing well
 
"Now, they are investment funds that are starting to accelerate their relocation projects. We already had large funds like BlackRock, and have just received confirmation of Citadel's arrival in Paris. Other medium-sized funds are expected to follow, as well as hedge funds, in addition to the French management companies, which have returned from London for the most part. And this movement will accelerate," he adds.
 
International direct investment in the financial sector grew by 14% between 2018 and 2019 in the Paris Region, while the Greater London economic region recorded a 29% decline over the same period.
"The London trading platforms have not received the same level of equivalence from Europe, which has led to the relocation of certain activities, particularly multilateral trading platforms, which compete with historical exchanges, such as CBOE Europe, Turquoise and Aquis, which have set up a subsidiary in Europe to maintain their markets," explains Antoine Pertriaux, head of research at the Adamantia consulting firm.
 
However, the announced exodus is nowhere to be seen. Transfers of financial jobs that have been made or are being studied are currently less than 10,000 cases, compared with 400,000 jobs in the financial sectors based in London, according to the Office for National Statistics.
 
The wait-and-see attitude of financial players
 
"We could not expect a massive relocation of banks to Europe, as London remains a leading international financial center and Brexit only impacts a certain number of activities, mainly related to euro-denominated products. The major international players took the lead in the loss of the European passport in order to be able to continue serving European clients from the continent, but a large part of their business remains located in the City anyway. So there was no question of making a massive transfer to Europe. In any case, not at this stage," says Adamantia's research manager.
 
However, some companies in the financial sector could wait to find out more about Brexit's modalities before taking the decision to relocate.
 
Because if on January 1, 2021, the United Kingdom lost its passport, the issue of financial services was omitted from the Brexit agreement. Some equivalences could be granted ... or not. "The final framework of relations between Brussels and London with regard to the financial sector has yet to be defined. The month of March has been announced for a Memorandum of Understanding between Great Britain and Europe", notes Antoine Pertriaux. And so far, the European Commission has only granted the United Kingdom one 18-month equivalence on clearing houses, which are responsible for verifying, among other things, that the buyer has the necessary funds and the seller is the proper owner. Here, the Commission had no choice, as the City dominates the market in this area to a very large extent.
Source : Bank for International Settlements
"We don't really have a European alternative, apart from Eurex Clearing, which has launched a competing service. London now concentrates liquidity on these products and the portion of euro-denominated products remains small. The interest for investment firms in using a single clearing house lies in the gains in margin calls, collateral, and netting effects between the different products. Being forced to fragment this liquidity to European clearing houses is not popular with financial services players," explains Antoine Pertriaux.
 
The battle has only just begun
 
But for Arnaud de Bresson, the question is already settled: "The loss of the European passport took place on January 1, 2021. The discussions that are currently beginning between London and Brussels will deal with limited subjects and will not call into question the movement that is taking place. The European authorities have decided to grant a punctual equivalence to the London clearing houses. The idea is that clearing houses will develop in continental Europe, and the Paris financial center is working actively on this subject".
 
In any case, the battle between the EU and London promises to be fierce. The European Union does not intend to let the UK continue to play the role of Europe's financial center that it has had until now, with London hosting a third of all EU capital market activity and 90% of the clearing of euro-denominated derivatives.
 
For its part, London, "liberated" from Brussels rules, could adopt less restrictive rules. Rishi Sunak, the British finance minister, said last December that Brexit is an opportunity for the UK to "rethink" its financial services offering.
 
For the time being, the City is well ahead of Paris. It is ranked second in the world's most competitive financial centers in the Global Financial Centres Index 2020, compared with 23rd place for the French capital.
 
While the European Union has many financial centers, none of them are currently capable of replicating all the services available in a single location in the City. However, Arnaud de Bresson believes that Paris has many advantages: "It is the only other universal place in Europe comparable to London, i.e. with multiple activities and the presence of large companies, a diversified financial industry and competent regulatory authorities. Even Frankfurt, which is behind Paris, is a regional capital and not a universal capital. If it is highly developed in the banking sector, it is not so highly developed in the other compartments".
 
Towards a multipolar world
 
Indeed, Paris is not only a leader in terms of market capitalization in the EU, but also in asset management, derivatives and the insurance market. In corporate bonds, it has a 35% market share in Europe. It is also number one in private equity in the Europe of 27, as well as in the sustainable finance sector, whose development is part of Paris Europlace's strategy.
 
"France will be by far the largest capital market in the EU on the other side of Brexit with a share of total activity of around 24%, ahead of Germany with 20%. It will be the EU's largest market in 16 of the 28 sectors we examined, ahead of Germany with eight sectors", predicts think-tank New Financial.
Source : Paris Europlace
However, Paris suffers from a tax system that is less favorable to companies than in London. Although it must be acknowledged that the government has increased its efforts in recent years, by abolishing the wealth tax on financial assets and planning to reduce the corporate tax rate to 25 per cent by 2022.
 
"I think that London, overall, will lose some of its greatness, but will maintain a leading position internationally. Paris has a card to play in that it has LCH SA, the clearing house that clears the Euronext market, and could expand its derivatives clearing activities. It also has a privileged position for investment bankers in private equity and M&A activities," says Antoine Pertriaux. However, he does not believe that Paris or Frankfurt will suddenly replace London. "Brexit will not lead to the creation of a new European London. The activity will be shared between the different centers, which should specialize with majors in the following areas: trading, post-trade, asset management, etc. Dublin is more focused on back office activity, with its geographical and cultural proximity to London, Luxembourg remains a very attractive country in terms of taxation, particularly in the asset management sector, and Amsterdam is the destination of choice for alternative trading platforms".