In the Eighties, Margaret Thatcher helped cement London's position as the centre of financial services in Europe. Its position was boosted through
In the Eighties, Margaret Thatcher helped cement London’s position as the centre of financial services in Europe. Its position was boosted through important reforms and deregulation, aided by an experienced, English-language workforce, a common law framework and a flexible working environment. Now, Mr Macron is serious about restoring France’s competitiveness in the financial sphere and quashing the UK could help him in this quest.
Wolf Klinz, a former German MEP, explained in The Independent in 2017 just how the French leader could achieve this.
He argued that the harder Mr Macron pressed the UK on matters like the financial passport or Euro clearing rights, the more business Paris could try to lure away from London.
What’s more, he said the French President has the “credibility and personality to convince the players of the City of the benefits of Paris”.
However, as a leader of a far more left-wing state than the UK, Mr Macron had to prove he is willing to make serious reforms to entice big financial players.
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He was elected on a mandate of reforming the French economy and administration, and one of his first actions in office was to pass a labour market reform bill.
His decrees made it easier for firms to hire and fire, simplify negotiations between employers and employees and reduced the power of France’s hugely influential unions.
Mr Klinz said ahead of the vote: “Should he succeed, that should pave the way to make Paris an attractive location for financial services for the single market.
“To some extent this will depend on the outcome of the Brexit negotiation, and a hard Brexit, with the UK losing access to the single market and dropping out of the customs union, would further strengthen the case for France as a finance hub.”
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Mr Macron hoped his reforms would also tackle France’s persistently high unemployment statistics and by October 2019, there was some evidence that his reforms were achieving their aims – unemployment had decreased to its lowest point in 10 years.
What’s more, the French economy appeared more resistant to the global economic slowdown than nations like Germany, and there was a decline in temporary contracts, according to the FT.
Florian Hense, economist at Berenberg, an investment bank, said: “Chances are high that thanks to Macron’s labour policies France looks much better by 2022.”
In this way, Mr Macron has made France a more credible alternative to the UK for financial services.
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Paris also has a headstart on other European cities in that it already hosts several of the EU’s top banks, the pan-European Euronext stock exchange and the European Securities and Markets Authority (ESMA).
It has the second-largest asset management industry in the world, and the largest European bond market.
However, to really turn the tables, he needs to make sure it is more difficult for firms to keep the status quo of centring themselves in London.
Perhaps this could explain why Mr Macron has been one of the most difficult EU leaders in negotiations.
To promote Paris as the centre of Europe’s financial sector, Mr Macron needed to make sure the City lost its access to the single market after Brexit.
He has always insisted that the “four freedoms” cannot be disentangled, inevitably pushing the UK towards a hard Brexit.
Meanwhile, Paris can make deals with European bodies to boost its own ranking.
Mr Klinz suggested: “Paris could cooperate with Germany and broker a deal which moves the European Banking Authority to Frankfurt close to the ECB and clearing and settlement of euro-denominated trades to Paris.
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“In addition, Paris could try in close cooperation with the European Commission and the European Parliament to increase the role of ESMA.”
In this way, Mr Macron could well be trying to promote Paris in the financial sector and aiming to replace London in a post-Brexit world where the City can no longer enjoy the benefits of the Single Market.
That said, there are strong indicators that London is going strong and will remain a hub for the foreseeable future, meaning the French President may have his work cut out for him.