When the UK voted to leave the European Union, French president Emmanuel Macron devoted a huge amount of energy to luring banks across the Channel.
He quite rightly saw an opportunity for his country.
Many financial firms are required to trade within the EU, and with its depth of expertise, vibrant culture and good schools, Paris was a natural alternative to Britain.
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Special tax deals were on offer, along with exemptions from onerous employment laws and even regulations in English instead of French. Macron rolled out the red carpet.
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To some degree, that worked out well. The finance industry added 25,000 jobs from 2017 to 2023, according to the French National Institute of Statistics and Economic Studies.
Morgan Stanley raised its head count in the city from 150 to 450; Goldman Sachs from 170 to more than 400; JPMorgan from 250 to almost 1,000.
Far more than Frankfurt, its main rival, Paris started to emerge as the main eurozone trading hub, with all the wealth and tax revenues that it can generate. It was a smart strategy, and it was starting to work.
Now, it is in full-scale retreat. None of the major banks are going to come out with a big public statement that they are leaving France – it’s not worth the political controversy.
Instead, they are just slowly scaling back, freezing hiring and winding down contracts. It is not hard to understand why. With a caretaker government facing a fiscal crisis and with borrowing stuck at more than 113% of GDP, taxes are going up.
The budget is still in flux, but it includes a corporate tax surcharge of between 3% and 9% for companies with more than €1 billion in revenue and an extra levy on anyone making more than €250,000 a year.
Neither are huge sums in the banking or hedge-fund industries and many may be caught out by the new rules.
The Senate has voted in favour of a new wealth tax, and even if that does not pass, the government is planning a “minimum tax” that would be much the same thing.
One thing is clear: the days when Macron, himself a former investment banker, could cut sweetheart deals with finance are in the past. France wants to tax the rich, and bankers can’t expect any special favours. They’re a target.
How the City can grab the opportunity
There is an opportunity here for the City – it should start tempting those bankers back.
When London was in trouble after Brexit, France aggressively targeted the banks. Now that the tables have been turned, we should be just as aggressive in trying to lure them back.
Sure, some trades still have to be made within the EU to comply with its rules, but many of the other executives and traders can be based anywhere, and London remains the pre-eminent trading and financial hub in Europe and the obvious alternative to Paris.
There are plenty of things that the City, working with the government, could do.
It could redraft the rules on non-doms (people who live here but are not registered as residents for tax purposes) so that finance workers are given an exemption from British taxes for five years.
It could tweak the windfall tax on banks to exempt any institution or office moving from France to London. Or it could offer a lighter-touch regulatory regime for any bank making the switch.
It could also start making a forceful case, using investment summits and promotional tools, to argue that London is now a more attractive place to base a financial business and that bankers are still welcome in the City.
The opportunity is there for the taking. If the City doesn’t grab it, another European financial centre will.
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