London wins favor with banks again amid chaos in France and Germany

Global banks are reconsidering their moves from London to continental Europe as political chaos engulfs the continent, The Mail on Sunday has been told.

Lenders have been gradually moving their operations to cities such as Paris and Frankfurt since the United Kingdom left the European Union, in some cases because European regulators force them to do so.

But with the French government collapsing and Germany in turmoil, some are stopping any non-essential measures.

A senior banking source said the mood had changed since the summer, when French elections plunged the country into chaos. With France and Germany in a “disaster”, the UK now “doesn’t look so bad”, the source told The Mail on Sunday.

The French have had no qualms about attracting bankers and others to Paris. Advertisements promoting a cross-Channel movement have appeared in UK newspapers saying: “Make it iconic.” Choose France.’

In 2016, France promised to make its tax regime for expatriates the most attractive in Europe and then-Prime Minister Manuel Valls said Paris would become “the financial capital of the future.”

Emmanuel Macron, the president – ​​a former investment banker – has been instrumental in the push. It has not been without results: US bank JP Morgan opened a shopping center in Paris in 2021 at an event attended by Macron.

And last year, France’s central bank said it exceeded expectations by attracting banks after Brexit, boosting its balance of payments, a measure of its foreign trade.

But the exodus to EU cities, with Frankfurt and Dublin also attracting British bankers, has not materialized in the way some had hoped.

In 2016, the year of the Brexit vote, the expected number of Brexit-related staff relocations in Europe was 12,500.

But many companies had second thoughts and by 2022 that number had dropped to 7,000, according to accounting firm EY.

Now, with sentiment towards France souring, the pendulum is swinging back towards Britain.

The early elections called by Macron led to major gains for the left and far right, and failed to achieve an overall majority for any parliamentary bloc.

Michel Barnier, the prime minister appointed by Macron to try to hold together a fragile government, faced the ultimately impossible task of trying to push through tax increases and spending cuts to repair France’s debt-ridden public finances.

His overthrow last week in a no-confidence vote was inevitable, causing some to raise questions about Macron’s own future. The chaos has unnerved markets, pushing up French bond yields.

Germany is also in turmoil, with an unstable coalition recently collapsing and the country’s once-powerful industrial base crumbling.