04 Feb 2018 - 10:29
The recent report of Paris could overtake London as Europe’s most important financial hub in a matter of years should be an eye opener for the Britain as the country is gearing up for the Brexit days.
Paris is one of several cities in Europe such as Frankfurt, Dublin and Amsterdam that want to attract businesses from London after Britain leaves the European Union in March 2019.
France stands top on the list to lure business from banks and other financial entities from the City of London, though France’s rigid labour laws and relatively high corporate taxes remained hurdles for Paris. However, France’s strong regulatory framework, the business-friendly reforms and the allures of Paris as a place to live, are all big positives for Paris. And the efforts by the France’s President Emmanuel Macron are also in the right direction.
Meanwhile, the UK economy ended last year on a positive note with a stronger-than-expected growth, though it’s moving at a pedestrian pace. The 0.5 percent expansion in the fourth quarter was better than the 0.4 percent forecast. For the full year, growth slowed to 1.8 percent, the weakest in five years, as consumers and companies felt the repercussions of the 2016 vote to the leave the EU.
In a sign of how far Britain’s star has fallen, IMF forecasts saw upgrades for almost every major economy except the UK which is seen growing at 1.5 percent this year and in 2019. And a Bloomberg survey is even more pessimistic, expecting growth to slow to 1.4 percent this year as well as in next year.
To quantify the damage from Brexit, Bank of England Governor Mark Carney said the economy is about 1 percentage point smaller than it would have been had the EU referendum gone the other way, and that the gap will widen to about 2 percentage points by the end of the year. That’s the equivalent of about $57bn. That is a major case of worry for the UK when it approaches the Brexit deadline.
For the French economy, Macron can look forward to steady growth with a sharply improved business environment. And the upward trend should remain on course this year with growth expected to cross a 2 percent mark. Though it’s shy of EU powerhouse Germany’s growth forecast of 2.5 this year, France is striving to be the financial power centre of Europe after the Brexit with the French government staging high-profile lobbying campaigns to lure banks away from London.
And Paris was given a boost in November, when the EU decided to relocate its London-based banking authority to the French capital after Britain leaves the bloc.
Britain, instead of allowing Brexit uncertainty to creep in further, should reinvent itself as the global financial powerhouse and boost trade ties like it did with China the other day to latch on to a global upswing that’s propelling its peers.