The French are renowned for treating courtship as an artform. Grand gestures, intimate discussions, and a little self-promotion can go a long way when trying to woo a romantic interest. But does that sort of flare work when it’s deployed by policymakers at hardnosed financiers? The Macron government certainly hopes so.
Earlier this month, French Deputy Finance Minister Delphine Geny-Stephann travelled to London to meet with various representatives in the banking, asset management, private equity and fintech sectors. Her goal was to plug Paris as an attractive alternative to London in a post-Brexit world.
France is taking a strategic approach to this courtship. The government would like to enhance Paris’ position as a leading finance centre after Brexit and the re-location of both prominent finance firms and innovative start-ups would help realise this ambition.
However, the French government doesn’t see this as a broad poaching offensive. Speaking at a press conference, Geny-Stephann said, “What we want is value-added jobs, value-added activities to be located in Paris and to have the scope of what a strong financial sector can offer”.
France’s economy minister, Bruno Le Maire, has expressed a similar viewpoint. Responding to questions last month about the French government’s motivation, he explained, “it’s not about making London lose out so Paris can gain. It’s just about making Paris more attractive.”
So how is France trying to lure finance and fintech leaders to Paris? As a former Rothschild banker, Macron understands such firms’ priorities. Since his election, the government has relaxed labor laws, reduced corporate tax rates, and limited redundancy costs. Macron also did away with the wealth tax, which would have hit bonuses – a central part of financiers’ compensation packages – particularly hard.
This policy shift is significant. As explained by Gerard Mestrallet, president of the industry lobby group Paris Europlace, “We’ve made more progress in the past two years in Paris than over the previous 13 years”.
While the French government should be commended for pushing through these reforms, it cannot be denied that Brexit will make France’s ambitions more likely to succeed. Currently, UK finance firms operate in the EU under a system known as “passporting”, which simply requires UK firms selling services in the EU to set up branches or agents on the continent. However, as the UK will no longer be a member of the bloc’s single market, this privilege is set to disappear in March 2019.
Instead, UK Prime Minister Theresa May has put forward a plan referred to as “enhanced equivalence”. This would build upon the equivalence principle already used by US firms through the establishment of a system of joint governance and safeguarding the UK’s right to access the EU market. However, the proposal has already been rejected by Brussels. As a result, firms currently headquartered in the UK may need to set up subsidiaries in the EU to continue doing business there.
A recent Reuters poll has identified Paris as the most popular destination for firms seeking to locate part of their operations in the EU. HSBC, JP Morgan, Morgan Stanley, Citigroup, and Goldman Sachs have all announced plans to expand their operations in Paris. In addition, BlackRock, the world’s largest asset manager, announced this month that its alternative investment services branch will be based in Paris.
Macron’s reforms are also doing a good job at building up the fintech sector in Paris. This can be demonstrated by the fact that its fintech start-up scene has already raised more than €200 million this year and is on track to exceed the amount raised in 2017.
While fintech start-ups only make up around 13% of all start-up money raised in France, the government’s actions are helping to create a more accommodating and therefore more successful fintech sector. For instance, it is expected that France will have a new regulatory framework in place for initial coin offerings (ICO) by 2019, which will provide legal certainty to the burgeoning blockchain industry and could help attract more innovative start-ups to Paris.
Commenting on the impact of France’s recent reforms, Le Maire stated in an interview with Reuters in January that Paris has “the best chance of becoming, tomorrow, the financial centre in Europe. Not the dominant one but the most important one.” If France’s persistence is anything to go by, it seems likely that Le Maire’s prediction will come true.