Just how low can European governments go?
City of London-based financial institutions are intensifying their search for plan-B locations as concerns continue to rise about Brexit’s potential threat to their unfettered access to EU markets and workers. With an estimated 35% of London’s wholesale market activities forecast (by Brussels-based think-tank Breugel) to migrate across the English Channel in the coming years, the race is on to displace London.
However, as the competition for Brexit spoils intensifies, relations between euro nations are showing signs of strain. Tax-haven par excellenceLuxembourg, equipped with a multi-lingual specialized workforce, is likely to be hot property in a post-Brexit world. The country’s competitive tax rates have already caught the eye of AIG, private equity giant Blackstone, and Lloyd’s of London, the world’s largest specialty insurance market, all of whom have expressed an interest in relocating part of their London operations there.
Luxembourg’s success has drawn the wrath of fellow Eurozone members like Ireland, which recently complained to the European Commission about “dangerous competition” from rival centers competing to host financial firms.
“Other cities in Europe are being very aggressive in trying to win business,” Eoghan Murphy, the minister in charge of promoting Dublin’s financial center, told Reuters. Murphy raised concerns about “creeping regulatory arbitrage,” a reference to undercutting rivals with lax rules, something about which the Irish republic knows a thing or two…