Is Milan becoming Europe's new financial hub?

The Galleria Vittorio Emanuele II in Milan, Italy.

(Image credit: Julian Elliott Photography)

published 15 July 2024

Milan has always been Italy’s financial centre, but it has never had much of a role on the global stage, and as Italy’s economy has stagnated over the last 20 years, even its domestic role has not amounted to very much. Over the last few months, however, there are signs that Milan’s reputation is starting to change.

Last week, we learned that the private equity firm Three Hills Capital Partners was backing plans to open a private-member’s club in Milan, modelled on London’s Soho House chain. Its aim is to provide a networking hub for all the finance professionals moving to the city. The hedge fund Capstone opened up an office in Milan in January, and Eisler Capital, Andera Partners, Arcmont Asset Management and Certares Management have all established a presence in Milan over the past few years.

Major global banks, such as Goldman Sachs and JPMorgan, are expanding their trading operations there too, and Barclays moved into a new office in the city in 2022. Meanwhile, initial public offerings (IPOs) on the stock market are recovering.

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Milan won the listing of the footwear brand Golden Goose, with a float worth almost $2 billion, and although its private equity owners pulled the deal at the last minute due to political turmoil across Europe, it is still likely to list in Milan eventually. In total, there were 39 new listings in Milan last year; admittedly, that is hardly a fantastic total, but it is more than London managed. Add it all up, and one point is clear. Milan is seeing a significant revival as a major financial centre. There are three reasons for that.

First, it has some very generous tax breaks, so long as you are not Italian. Anyone moving to the country can opt to pay a flat rate of €100,000 on their global income, and the rest of it is tax-free. Sure, that might seem like a lot of money to most of us, but if you are earning £1 million a year, as a small group of very successful people in finance do, then it is a pretty good deal. You pay £84,000, the current rate, in tax, and the rest you can keep.

It is a lot less than the 45% in income tax you would pay in London, especially if the new Labour government changes the rules on “carried interest” for private equity executives so that the money they make is taxed as income instead of as a capital gain. Italy has crafted a smart set of tax breaks that make it an attractive destination for genuinely high-earners, but that limit the numbers. With taxes going up everywhere else, that is going to make Milan an increasingly attractive choice.

How does Milan compare to its Europe counterparts?

Next, other financial centres have started to become a lot less welcoming. London is the most obvious example, with a crackdown on non-doms, the taxation of private equity partners and possibly a big increase in capital gains tax as well. It had already been turned into a relatively high-tax location under the Conservatives, but under Labour it will become even less friendly towards finance. Its main rival in Europe – Paris – is going the same way.

Germany may well be heading for the same sort of political crisis as France, which will make Frankfurt less attractive as well. Against that backdrop, a low-tax Italy, with relative political stability, looks very appealing.

Finally, Italy is growing again. By the end of 2023, its economy was 4.3% larger than before the pandemic, the strongest recovery of any of the major European countries, and ahead of Britain, Germany and France. It is forecast to expand by another 1% this year. Hardly a turbo-charged rate, but still significantly ahead of the 0.7% rate forecast for the eurozone as a whole.

After two decades of stagnation, that is a significant change. Sure, it received huge funds from the rest of the EU as part of the Covid Recovery Fund, and as that wears off its growth may weaken again. Even so, it means that the local economy is stronger and generates more business. Add in a great lifestyle, with excellent food, lots of stylish shops, and easy access to stunning lakes and beaches, and Milan has a lot going for it. Piece by piece, Milan is turning into a genuine alternative to London, Paris and Frankfurt – and it may soon turn into a real threat.

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Matthew Lynn is a columnist for Bloomberg, and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years.

He has written books on finance and financial topics, including Bust: Greece, The Euro and The Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031. Matthew is also the author of the Death Force series of military thrillers and the founder of Lume Books, an independent publisher.