The opinion of the Bank of England’s Governor Mark Carney is that the risk of a no-deal Brexit is “uncomfortably high”, which has already caused some businesses to partially relocate to other financial centres in Europe.
If the Governor’s judgement proves to be accurate, will the City of London lose its position as the financial hub of Europe? If so, where will institutions relocate, Paris, Frankfurt, or elsewhere?
Time is making this a pressing issue for all businesses in the financial sector. As the final withdrawal deadline of 29th March 2019 edges closer, you may have started to consider your options.
Moving in March: the top post-Brexit locations
Although Paris was not a leading relocation contender initially, the French capital has become more likely for some businesses as Brexit rumbles on. A recent survey from Reuters on potential post-Brexit locations showed that it could net around 2,000 extra jobs as a result.
Why the increased interest? The main reason is that French President Emmanuel Macron recently made changes to the country’s legislation that allows for lower corporation taxation rates (competition for Frankfurt) and also eased restrictive Parisian labour laws.
Much of the worry around relocating to Paris seems to revolve around the city’s financial sector having been more focused on domestic services in the past.
However, 17 of the world’s 20 largest banks already have a presence in the Paris region, along with three of Europe’s five biggest investment banks. The major retail bank BNP Paribas is also headquartered in Paris.
Dublin is the favoured location for many UK businesses planning for life after Brexit. By moving to the Republic of Ireland the companies can maintain a presence in the EU while retaining a close geographical link with the UK.
Many of the top global business leaders met in Dublin in January to discuss the role that trade in the city could play in the international financial community. One big advantage the city boasts is a thriving tech and software market.
Google, Facebook and Accenture are just a few of the big names that have offices in Dublin’s Silicon Docks. In the financial sector, Bank of America Merrill Lynch, the multinational investment bank that is part of Bank of America, has already commenced operations there.
The main arguments against relocating staff to work in Dublin could be the feeling that the whole financial sector lacks the breadth of its rivals in other parts of Europe. Dublin is not located centrally within Europe which may also be an issue for some organisations.
Something of a dark horse for post-Brexit relocation is Luxembourg. The quality of life available for employees that move to Luxembourg is enviable. In addition, the national taxation system is favourable for businesses.
Being such a small community means that trade in Luxembourg may lack the collaboration opportunities presented by other locations.
It is estimated that around 3,000 jobs in the financial sector will be heading to this bustling German city so it be could the ideal choice for some financial institutions.
Long being seen as the main rival for London’s crown as the prime European financial hub, the recent move by Deutsche Bank to shift its euro clearing activity there reinforces Frankfurt’s claims. However, the city does have some restrictive labour laws and high taxes which could make it less attractive to trade in Frankfurt.
An interesting fact about Frankfurt is that 35 per cent of the continent’s internet traffic passes through it, and it is ranked as the world’s largest data hub. Efficient and secure data centres are of course vital for the smooth running of major corporations.
DON’T WRITE OFF LONDON QUITE YET!
With many financial businesses uncertain about the future following Brexit, it can be tempting to write off London as a place to do business moving forward. Good advice would be: don’t jump the gun! Recent investments in London by major global players like China and Qatar indicate that the City is not yet finished as a financial hub.
Although it’s taxing to plan for what is almost the unknown, it’s useful to be aware of your options and equipped to react in a timely manner if and when the need arises. Watch for our upcoming guides, including how to choose the right data centre for your business, and a technical guide on moving office.
NOW IS THE TIME TO PREPARE
With the final Brexit deadline less than six months away on 29th March 2019, there is still much to be decided between the UK and Europe. That means that whether you opt to stay in London, move some staff to offices overseas, or relocate to a European office entirely, you must plan for it properly.
Robust strategic planning will allow you to ride out any market upheaval after the withdrawal and your business will remain well placed to thrive.