Luxembourg is winning Brexit business with an unlikely pitch: don’t bring all your London-based staff.
European capitals are vying to attract UK-based financial firms that need to increase their presence – or establish a presence – within the European Union (EU) to continue selling their services across the Continent after Britain leaves the bloc in 2019.
However, unlike cities such as Paris, which has been lobbying for major relocations aggressively, Luxembourg City – with a population roughly one-quarter the number of workers employed in the City of London – would struggle to cope with a massive influx of financial-services workers.
“Luxembourg cannot be a candidate to attract Barclays bank moving, say, 2,500 people to Luxembourg because we just cannot house them,” said Paul Mousel, founding partner at law firm Arendt & Medernach. “We just do not have the infrastructure.”
We decided relatively early on not to go running around like butterflies on crack
The Luxembourg government has therefore adopted a much more complementary approach, where London remains Europe’s major financial hub.
“We decided relatively early on not to go running around like butterflies on crack as maybe some others have done,” said Nicolas Mackel, CEO of Luxembourg for Finance.
Luxembourg Finance Minister Pierre Gramegna also highlighted in Parliament earlier this summer that the country hoped to attract hundreds rather than thousands of workers from Britain, and that the Grand-Duchy was looking for “qualitative growth”.
The government’s strategy has been echoed by senior figures in the Luxembourg finance industry who have been candid about the limitations of an already-strained transport infrastructure, housing and school places. Many have intimated that Luxembourg is instead hoping to attract “activities”, alongside highly qualified top-tier staff and managers.
“Luxembourg has pitched an intelligently complementary offer to London,” said Jeremy Browne, The City of London Corporation’s Europe envoy, adding that this approach was appreciated by businesses “inclined to move the minimum amount of people consistent with doing what they need to do to adjust to the realities of Brexit.”
Insurers and fund managers
This pitch has won over both insurers and fund managers wary of major disruption to their business and staff in London but that need to establish or increase their European presence to prepare for a so-called ‘hard Brexit’, where they would lose access to the single market.
In particular, Luxembourg has been named as the location for the European base of a series of specialty insurance companies, such as AIG, Hiscox, RSA, Liberty Specialty Markets, CNA Hardy and FM Global, as well as asset managers such as M&G Investments.