Europe’s got talent?!
In the wake of the results of the Brexit referendum which was held on the 23rd of June last year, multiple businesses have been in a doubt about leaving London and settling in a major European city on the mainland. This is caused by the fact that the Brexit may have negative consequences for big companies such as banks and law-firms. Last week, the House of Commons agreed to start the Brexit-procedure, this makes the probability that the Brexit will happen higher, only the House of Lords will have to agree now in order to start the procedure.
There is plenty of choice for the companies which are planning to move. For the countries and cities to which these companies will be moving there will be multiple financial and political advantages. The cash flows in and out of the country will be higher, the city in which the corporations will settle will also enjoy other companies moving in since it is becoming a bigger business district. If the city starts to grow financially it will also start growing politically since we live in a monetary society.
Since London used to be the centre of Europe for the financial industry, the ‘replacement’ needs to be on sort of the same level. Cities such as Dublin, Paris, Frankfurt, Amsterdam and Luxembourg are quite good possibilities. Dublin is one of the major contenders, geographically it is quite close to London and the main language is English as well. The disadvantage of Dublin is that it is not exactly a metropolis. London for example is a main airport hub, which makes it easy to reach from almost all over the world. The easiness of travelling combined with the cultural heritage of London also makes it attractive for tourists, which causes the city to be more ‘popular’. Dublin does not (yet) give this ‘city of the world’ feeling to tourists and visitors, although this might become a thing in the future. Paris however, is a city of the world, it is famous for its architecture and monuments, and because of this, the city is very well-known all over the world. Frankfurt, Amsterdam, and especially Luxembourg are a bit more unknown-of, Amsterdam is usually being associated with its red-light-district and the weed capital of the world, whilst most people don’t really know Luxembourg and Frankfurt and what they, culturally speaking, have to offer.
But the most important parts about moving big and powerful institution are of course the benefits which these companies will get. Currently, a few countries within Europe are trying to convince these big institutions to move to their country because of the benefits they will provide. However, since every country would like to convince these companies to move, the benefits are getting better and better because every contending country wants to exceed the benefits of the other one. This might lead to extensive benefits, which could cause more countries to leave London and move to another country.
There are a few big companies for whom it is quite likely that they will move (a part of) their employees from London to the mainland. These companies include HSBC, Deutsche Bank AG, Credit Suisse Group AG and ING Groep NV. Some of these financial institutions already have moved (some of their) operations abroad, to Dublin and Luxembourg.
All of the contending countries have some advantages and disadvantages.
- Advantage: moving financial institutions to Paris will lead to new opportunities for the city to establish itself as a financial centre. The government is really interested in this potential development, so some interesting benefits may be brought to life in order to attract London companies.
- Disadvantage: French are not known for their fluency in English and their long days at work; they even have a 35-hour work week, which is not desirable in the financial sector.
- Advantage: Frankfurt is already known for being a major financial capital in Europe, and there is a lot of office space available for moving companies. Frankfurt is also home to the German stock exchange.
- Disadvantage: Germany has strict laws about employment and high taxes. Frankfurt also has not got the reputation as a cultural city such as Paris, Berlin or London.
- Advantage: most of the people into finance and business will know that Amsterdam was home to the first stock-company and central bank in the world, it has got the financial heritage it needs. The Netherlands is also known, especially by big firms, for its special ‘tax arrangement’, which is also known as ‘the tax evasion system’. Paying less taxes is of course interesting for any company. Besides that, the Dutch are also known for being quite good at the English language, and they are internationally orientated.
- Disadvantage: Amsterdam is, compared to other capitals, just a small city with less than a million inhabitants. Dutch legislation also limits the bonuses which are paid to important bankers to 20% of their annual salary.
- Advantage: Luxembourg has been growing in the past thanks to the bank’s’ secrecy and tolerance towards tax avoidance structures. This made it into a banking country which is nowadays competing with the likes of London and Frankfurt. Luxembourg is also known as a country which has a fast adaptation of legislation.
- Disadvantage: whilst the size of Luxembourg, with just over one hundred thousand inhabitants, is small and might lead to disinterest of companies, it is also an advantage. Some companies are planning to move hundreds, if not thousands of employees. On a population of one hundred thousand inhabitants, a thousand bankers would make a huge positive difference to the economy, which is a good motivation for the government to change legislation to the financial companies’ likings.
- Advantage: the most important advantage for Dublin is its corporate tax rate of 12.5%. Besides the tax rate, Dublin offers employees the same language and almost the same culture, which would make moving less difficult.
- Disadvantage: Dublin is: relatively far away from the mainland, relatively small compared to other capitals and it might not be able to handle a lot of workers coming into the city because of limited office space available.
What do you think what countries or which cities would be a good host to the moving financial industry from London? Let us know in the comments!