Luxembourg will not seek to lure away British financial firms anxious about keeping a foot in the European Union after Brexit, the Grand Duchy’s government said on Monday, saying it aimed instead to work with them for mutual benefit.
The UK financial sector and Luxembourg have long had close ties, especially in managing Europe’s trillions of euros in pension investments, and both countries are advocates of a liberalised market in financial sectors.
Britain’s decision to leave the EU in last month’s referendum has sparked hopes on the continent that parts of the UK’s lucrative financial service sector, Europe’s largest, would migrate to maintain access the bloc’s huge single market.
French President Francois Hollande said clearing in euros, a niche dominated by London, must shift to the euro zone. Germany hopes UK financial technology firms will up sticks to Berlin while some insurers are eyeing a base in Dublin.
Luxembourg officials said they saw a more nuanced approach.
“I hear the French say they would roll out the red carpet — but they are always on strike,” Etienne Schneider, the Grand Duchy’s deputy prime minister, told Reuters.
“We are not here to take your companies back to Luxembourg.”
While the government is aiming to diversify the economy into biotech or even deep space mining — the exploitation of raw materials found in space — it is also keen that its financial services sector, which makes up a quarter of the economy, is not derailed by Brexit in any way.
It worries about losing a market-friendly ally once Britain has left the EU, and what that could mean for the tenor of future financial regulation in the bloc.
Luxembourg is a major centre for listing mutual funds, many of whose assets are managed from London, a profitable symbiotic relationship both sides would want to keep.
“We are very interested to assure our collaboration will be possible after Brexit. Can we be their partner on the continent to develop their activities, thinking about the European passport and so on?” Schneider said.
Many financial firms have long served the continent from their London base through “passporting” rights granted under EU rules that may no longer apply once Britain exits the bloc.
Some bonds have already been delisted in London and relisted in Luxembourg since the UK referendum.
What becomes of passporting rights hinges on UK-EU trade talks that could take years to finalise.
“Luxembourg as a financial centre and London are partners, very complementary, and we want to continue that relationship, Luxembourg finance minister Pierre Gramegna told Reuters.
But he cannot see Britain being allowed full access to the single market without accepting that EU citizens can work in the UK under existing EU freedom of movement rules.
“There is quite a lot of common denominator in the EU-27 that you cannot do cherry-picking,” Gramegna said, repeating a phrase used by German Chancellor Angela Merkel of the position of the other 27 members of the EU club.
Even if Britain were not to obtain full passporting rights, that does not mean there won’t be business between the UK and EU, Gramegna said.
Yet he said UK financial firms wishing to use Luxembourg as a beachhead into Europe won’t get away with having a letter box for an empty shell there.
Crackdowns across Europe on tax avoidance will mean that firms operating from Luxembourg would need a “credible” amount of staff, capital and investment to show there was “added value” locally, Gramegna said.
While not overtly drumming up business, government officials said there was available office space in the Grand Duchy.
It is also expanding its international schools and will offer the International Baccalaureat in English in state schools to make expatriates and their families feel more at home.
Source: Reuters.com – By Huw Jones and Guy Faulconbridge