The Daily Telegraph - Business
Banks say ‘non’ to French bid for City jobs
Politicians warned Paris very unlikely to capture London’s crown after Brexit due to labour laws
A GROUP OF large global banks has told French politicians in brutally clear language that Paris has almost no chance of capturing serious business from the City of London without radical reform of the country’s labour code.
A special Brexit panel in the French Senate revealed just how difficult it will be for Paris to become Europe’s preeminent financial centre once Britain leaves the EU. Any migration is more likely to go to Dublin, Frankfurt, or even to New York. Jean-Frédéric de Leusse, head of UBS in France, said the French law does not offer major banks the complete flexibility they need in the fast-moving world of high finance and complex trading.
“As the saying goes, it takes three days to fire somebody in London, three months in Switzerland, and three years in Paris. It may be an exaggeration, but it is probably quite close to reality,” he said.
Mr de Leusse said UBS employs far more French citizens in London than it does in Paris, and that is unlikely to change quickly.
René Proglio, chairman of Morgan Stanley in France, said those making the key decisions at corporate headquarters in New York could not care a hoot about the lifestyle or happiness of their staff.
“That is not their concern, so don’t get carried away with a humanist philosophy. Like it or not, their only objective is to defend the interests of the shareholders,” he said.
Mr Proglio said the crucial issue for banks is the level of corporate taxation and the overall cost of labour. France is simply not competitive. “Employers’ social charges are colossal. It is a handicap and the gap with Frankfurt is a very big problem,” he said.
Marie-Anne Barbat-Layani, head of the French banking federation (FBF), said Paris has trump cards to play in the post-Brexit race. Four of the nine largest banks in the eurozone are French and the fund management industry is the largest in the currency bloc.
But draconian labour laws are anathema to foreign investors. Once you take the plunge on extra staff, you are effectively trapped. “Employers don’t have any margin for error. They can’t manage their head-count,” she said.
The bankers called for root-and-branch reform of the French labour code, which has tripled to 3,000 pages since 1985. The legal system has 400,000 business norms and regulations, with 360 separate taxes, some dating back to before the French Revolution.
Stéphane Boujnah, president of Euronext, told lawmakers that they need to be properly aware of the “devastating impact” of populist measures such as the 75pc tax (since withdrawn) or the Tobin tax on financial transactions.
Mr Boujnah said the Tobin tax was “absurd, ideological, and yielded nothing”. The authors failed to heed the disastrous lessons from Sweden in the Nineties, when a variant of the tax proved impossible to collect and wiped out parts of the Swedish financial industry.
He also had a severe warning for Britain, calling Brexit a fundamental rupture that had “started on the wrong foot” and would have enormous consequences for London.
Mr Boujnah said the rest of the EU would no longer tolerate the anomaly of an offshore financial centre servicing the euro in London now that the British people had chosen to pull out of Europe’s “shared federal destiny”.
The evidence so far is that “refugees” from London are looking at Frankfurt as a potential hub in Europe as Britain loses “passporting” rights in the EU services market, with Dublin playing a support role in certain niche operations.
A “Brexit workshop” in Frankfurt held by the German regulator BaFin earlier this month was heavily attended by bankers from London looking for a new foothold.
However, the banks were warned that German licences would be hard to secure. The foreign institutions would not be able to waltz into Frankfurt on their own minimalist terms, playing off one financial centre against another in regulatory arbitrage. The operations of any subsidiary based in Germany would have to be managed in Germany itself.
BaFin’s chief concern is to safeguard the stability of the German financial system. “Foreign banks are welcome here, but it is just not good enough to nail in a brass plate and set up a sales unit,” said Peter Lutz, BaFin’s chief of banking supervision.
Dr Lutz said there are no grounds for gloating over Brexit. The ructions to follow are likely to convulse Germany and “dramatically change” the job of the German regulator.
“Brexit is a bitter blow for European unification, but BaFin cannot change the situation and we have to deal with it as pragmatically as we can,” he said.