Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily on December 18, 2017

KUALA LUMPUR: France’s capital Paris stands to be the biggest beneficiary when the UK exits from the European Union (EU) in March 2019.

Many banks and financial institutions affected by Brexit are considering moving their activities to other European cities and Paris, Amsterdam, Dublin, Frankfurt, Luxembourg and Madrid are frontrunners to replace London as the continent’s premier financial centre.

“We didn’t want Brexit; we have expressed many times that Paris was in favour of the UK remaining in the EU. But since the majority of British people voted in favour of Brexit (in the 2016 referendum), we have seen new developments in Paris as an international financial centre,” Arnaud de Bresson (pic), managing director of Paris Europlace, which promotes Paris as a financial centre, said.

“We think, and British people think so, too, that London will see its role as a leading international financial centre reduced (after Brexit), while that of other financial centres in the EU, particularly for Paris, will increase,” he told Malaysian journalists in his office in Paris recently.

Already, several large companies based in London such as HSBC Holdings plc and US-based insurer Chubb have announced their decision to move jobs to the French capital after Brexit.

Paris finds itself competing with other European cities like Dublin, Frankfurt, Luxembourg and Amsterdam to become the region’s leading financial centre, but de Bresson is confident Paris can win the title.

According to him, Paris has four major advantages over other European cities to replace London as Europe’s financial hub and one of them is that it is a global city comparable to London, representing “about 5% of the global gross domestic product and has access to over 500 million consumers in the EU, a strong labour market and the presence of big corporates”.

Another of Paris’ major strengths is its position as a large financial centre in the region.

“In the EU, there are smaller cities such as Dublin, Frankfurt and Luxembourg that specialise in back-office activities. We are located in the middle of the EU and are easily accessible to all of these cities. For example, Franfurt is specialised in handling the complicated interest-rate derivatives trading and commercial banking activities, while Paris is much more capital-market developed and a leader in equities (after London), corporate bonds and asset management in Europe,” said de Bresson.

He said Paris is also at the forefront in financing green infrastructures. “This activity has accelerated since the Paris Climate Conference (COP21) in 2015.”

“We are also active in Islamic finance. We have made certain amendments to our laws to promote Islamic finance here and to facilitate the opening of Islamic banks, sukuk issuances and takaful instruments here,” he added.

Another of Paris’ major strengths is that it is a leading hub for high technology and financial technology in Europe.

Fourthly, Paris’ efforts to woo financial institutions and corporations considering moving out of London due to Brexit, are also supported by the French government’s recent reforms at making Paris a more business-friendly city.

De Bresson said French President Emmanuel Macron has introduced labour law changes that have made France’s labour market more flexible. It was reported that Macron’s reform aims to entirely reorganise the French labour market, which is traditionally protective of workers’ rights, and move power into the hands of employers and companies.

In addition, the French government is reportedly preparing a new round of tax cuts in January, which has long been seen as unattractive to top earners due to the high amount of taxes they have to pay compared with other countries.

Paris’ tourism industry also looks set to benefit from a growing number of business travellers as more companies move jobs out of the UK.

“More congresses, meetings and incentives are being hosted in Paris,” Mairie De Paris deputy mayor in charge of tourism and sports Jean-Francois Martins said in a separate interview.

“Paris is today less known to the general public as the world’s biggest city for hosting meetings, incentives, congresses and events. But, we host about 1,000 congresses per year, in particular medical congresses, and business travellers account for 40% of our total visitors,” he said.

Business travellers also generally spend more money than leisure travellers. Cognisant of this, the city is expanding its number of convention centres. “The opening of the Paris Convention Center is slated for 2018, which can host 30,000 people. It will probably be the biggest conference centre in Europe and top three in the world,” Martins said.

However, the weakening value of the pound since the UK’s vote to leave the EU is a cause for concern as British holidaymakers find European cities like Paris more expensive.

“Our largest number of tourists comes from the UK. As such, we are worried that we will see a decrease in the number of British visitors due to the weaker pound against the euro,” Martins said.

After suffering a 7% year-on-year drop in visitors last year following a string of terror attacks, Martins said tourist arrivals to Paris in 2017 is set to be a record since 2008, supported by a stimulus of €8 million for the tourism sector and the recovery of its two traditional markets, Brazil and Russia.

“We are targeting [to welcome] 25 million tourists for downtown Paris and 46 million tourists for Greater Paris this year,” he said.

Another thing going for Paris’ tourism industry is the holding of the Olympics in 2024. Martins said Paris has allocated a €6.7 billion budget for the 2024 Olympics, of which €3.7 billion will be on organising the games, which will be 97% privately funded. “The remaining €3 billion is for delivering the infrastructure, which are half private and half public funds. We are expecting no cost overrun.”
 

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