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Five cities pitch for a slice of London’s financial services pie

When it comes to financing, there is only one City in Europe.

London ranks first in the world in the Global Financial Index that measures the overall business environment, financial sector development, infrastructure factors, human capital, reputation and general lifestyle factors.

That is why more than five cities are lining up to carve out a piece of London’s business over the next few years. Different cities are competing for a different slice, making a pitch on the basis of a unique selling point. In terms of jobs, London stands to lose anything from 75,000 to 230,000 jobs.

Perhaps more significantly for London, it is now losing its appeal as the centre of financial decision making. Rather than making the rules of the game, the UK will become a “taker” of financial regulation, unable to influence the Single Market just as it tries to hold on to the business.

London frequently pitched itself to the financial industry as a gateway to Europe. Without EU membership and a question mark over “passporting” rights, all kinds of business are relocating, from insurance companies and asset managers to accounting consultants and High-Frequency Trading firms. But, where are they going?


Amsterdam pitches itself as the destination of choice for the so-called “fixed asset” sector of pension funds, asset managers, and insurance companies. Amsterdam ranks number 40 on the Global Financial Centers Index.

Amsterdam’s competitive advantage is a culture of innovation, pioneering High-Frequency Trading (HFT), as well as an extremely welcoming regulatory environment. Its pitch rests on three pillars.

First of all pension funds, insurance companies, and asset managers are the biggest clients of HFT platforms. In the Netherlands, they can work through such platforms without being considered “clients,” which saves them money in administration and taxation. Secondly, with an installed capacity of 83 terabytes per second, Amsterdam is second only to London in private data links capacity. Finally, most Dutch people speak English, while the country offers world-class schools, museums, connectivity, and infrastructure.

Armed with this package, it is eyeing London’s crown jewel of Euro-clearing operations.

In addition to the homegrown Optiver, IMC, and Flow Traders, the Netherlands are likely to attract US-based operators. Due to the Financial Instruments Directive (MiFID), these companies need to set up shop in Europe, which no longer means London. For companies such as Chicago’s DRW Trading and the Texas-based Quantlab, Amsterdam is the destination of choice.

London is also likely to lose a whole cluster of prop traders, trading platforms, and asset managers to the Dutch city, including Tradeweb and MarketAxess. Among the big names moving some of their operations to Amsterdam are the Royal Bank of Scotland, Mitsubishi, and Mizuho.

There is one significant disadvantage for investment bankers in Amsterdam: bonuses in the Netherlands are caped to 20% of their salary, as opposed to the 200% EU average.


Dublin’s principal attractions are the language, as well as the legal and the tax systems. From a regulatory perspective, Ireland means minimum disruption for British relocating companies.

The Irish capital ranks 33rd on the Global Financial Index and host half the world’s biggest 50 banks. Moreover, it has a global reputation for attracting international talent, servicing companies like Google, Facebook, Twitter, LinkedIn, Skype, and PayPal.

British and American insurance companies AIG, Lloyds, Hiscox, Beazley, and Admiral are buying into Dublin, along with legal and accounting consultancies. That relocation has contributed to an explosive surge in local real estate prices that is aggravating locals.

The government is keen to facilitate this process, introducing some perks for relocating companies, mostly in the form of tax relief. In addition, the city offers world-class culture and education facilities, although its link to the rest of Europe does not compare to the connectivity of its rivals.


Frankfurt is the capital of the Eurozone, political and economic. In the Global Financial Centers Index, it ranks 23rd. The city hosts the European Central Bank and the Deutsche Börse, that is, Europe’s biggest stock market that came close to taking over London’s Stock Exchange.

From a regulatory perspective, the German city is as close to a rule-maker as one can get in post-Brexit Europe. Morgan Stanley, Citigroup, and JPMorgan have already signalled out Frankfurt as their new base of operations in Europe after Brexit.

However, most analysts signal the city as a destination for regulatory experts rather than investment bankers; that is because its infrastructure, culture, and nightlife is those of a 730,000 people town, not a cosmopolis. Frankfurt expects to add 10,000 people in its financial industry and 41,000 more in anything from construction workers to taxi drivers. Still, it remains a small provincial German town rather than a global cosmopolis.


Paris is the only comparable city to London when it comes to global prestige. Emmanuel Macron is racing against time to deregulate big business and the financial sector to ensure the French capital draws some of London’s business.

Some of the perks being offered is a generous expatriate tax regime, which will see 50% savings in income tax for international high-earners. Combined with an offer of world-class schools, culture, and lifestyle, Paris makes an appealing proposition to investment bankers.  Recently, the French Prime Minister Edouard Philippe promised to cut corporation tax from 33% to 25%.

The city has jumped seven places since its last ranking in the Global Financial Centers Index to reach 29th place, that is, the third in Europe. If Paris maintains the pace of reforms and builds credibility, it could succeed in its objective to snap 20,000 jobs from the City. Some of its work will entail convincing big French firms to repatriate.


Luxembourg ranks 18 in the Global Financial Centers Index but is second in Europe only to London.

Its tax regime is one of its biggest attractions, and that is why many European companies have relocated their headquarters to the Duchy. Situated at the heart of Europe, Luxembourg also offers high connectivity, good schools, and a high quality of life.

The Dutchy is trying to raise its game, trying to secure the relocation of the European Banking Authority. In doing so, Prime Minister Xavier Bettel makes reference to a 1965 ruling that commits the EU to locate agencies related to finance in Luxemburg.

Beyond jobs: London no longer makes the rules

What is clear is that “being inside the EU cannot be the same as being outside.” That is the message to London from Brussels.

The Bank of England Governor Mark Carney and the International Regulatory Strategy Group (IRSG) are calling on Brussels to open its financial services market to “global rules,” complete with a dispute resolution mechanism governed by “independent” regulators. What Europe gets in return is presumably a “deep and liquid” market, or so the argument goes. And yet the most politically powerful EU-member states have much to gain from carving out London’s business. Besides, the notion that Europe will change its rules to accommodate the City appears “fanciful.”

London will become a taker of financial regulation. After the resignation of the British Financial Services Commissioner Johnathan Hill in June 2016, London has lost any claim of leading the industry. When the European Banking Authority relocates, the City will remain an important global financial center. But, it will be less important for Europe.

The Original Article was published by New Europe: