Paris vies to overtake London as finance hub post-Brexit

As the British government scrambles to find a business plan in the wake of last month's Brexit vote, France has outlined new measures to attract finance jobs from London.
A French flag flutters near the Eiffel Tower on a sunny spring day in Paris, France, April 18, 2016.
A French flag flutters near the Eiffel Tower on a sunny spring day in Paris, France, April 18, 2016.PHOTO: REUTERS

PARIS (AFP) - British Prime Minister David Cameron once gleefully offered to "roll out the red carpet" for French executives wanting to escape staggering wealth taxes.

Now, with London's red carpet fraying after the Brexit vote to leave the European Union, Paris is stepping in to welcome bankers and investors who may want to flee the uncertainty hanging over the City's role as a global finance hub.

"In this new environment which is taking shape, we want France to be attractive," Prime Minister Manuel Valls said on Wednesday as he unveiled measures to boost the allure of Paris.

Valls said he wanted to improve the tax and legal framework to "welcome even more companies (and) make Paris the capital of smart finance."

Notably, he confirmed plans to cut France's corporate tax rate to 28 per cent from 33 per cent, a move previously announced by President Francois Hollande.

Britain's vote to leave the European Union "created shockwaves for all European citizens but also... many businesses settled in the United Kingdom," Valls said.

The Prime Minister announced a tweak to a system allowing foreign employees to benefit from tax reductions, making it applicable for eight years instead of five.

The government also plans to put in place a system to help companies and their foreign workers settle in France - where red tape can be a nightmare to navigate.

This service will help companies with questions about real estate, residency permits and schools.

Valls said France would open "as many international sections as needed in schools" to allow children of foreign employees to be taught in their mother tongue.

 

However, Paris is not the only European capital clamouring to take London's spot as a major finance centre and gateway to the EU market, and analysts say it may not be the top choice of investors and bankers.

Stephane Garelli, an expert in world competitiveness at Switzerland's IMD business school, recalls that Hollande declared during his 2012 campaign that his number one enemy was "the world of finance".

"I think that people will look at other alternatives before France. The anti-business reputation is very strong there, also there is the problem of language," Garelli told AFP.

He said that among the contenders, Dublin appeared best-placed to take over from London, and has been "flooded by requests from UK companies".

"It is also a financial centre, it speaks English, it is just next door," he said.

Another attractive country was the Netherlands, although calls there for a similar referendum may put businesses off.

According to ratings agency Standard and Poor's, a fifth of all global banking activity takes place in London.

The city - which voted to stay in the EU while the rest of the country chose to leave - is the gateway for US and Asian businesses into Europe's vast single market.

Garelli said that while Britain was likely to negotiate some kind of access to the EU market, this could be a long process and "business will not wait".

According to the World Bank's 2016 Ease Of Doing Business report, France ranks 27th out of 189 countries, while Britain comes in sixth.

The Socialist government came into power in 2012 promising a 75 per cent "supertax" on top earners - which sent the rich fleeing - and became another symbol of France's opposition to big business.

However, the measure was increasingly watered down and quietly dropped in 2015, as it did little to boost a stagnating economy.

Hollande has since steered his government on a wildly different path to stimulate the economy, with a series of economic and labour reforms that have enraged the left flank of his party, which now accuses him of being too pro-business.

As an indication of how difficult the reforms have been, Valls had to force both sets of reforms through parliament without a vote using a special constitutional measure.

The labour reforms have been accompanied by months of violent protests and lengthy strikes.

Garelli said that businesses could also be put off by this "political volatility", ahead of April 2017 elections.