European bankers in London: "This didn't need to happen"
As the UK prepares to welcome its third prime minister this year, and with taxes widely expected to increase in next Monday's budget, some of London's most loyal European bankers are considering their options.
The City has long been a magnet for European bankers and traders seeking work outside local markets that were historically considered parochial and poorly-paying. But times have changed, and for some in London there's now a sense that superior opportunities are on offer in other European cities.
"London is at risk, major risk, and it's unnecessary," says one senior Continental European trader who's been in the City for nearly three decades. "This didn't need to happen, and it's all been for nothing really."
London has been rendered less appealing both by Brexit and by income taxes that are already high compared to elsewhere and that are likely to get even higher. The new preferred location for bankers and traders looking to optimize their post-tax income in Europe is Milan, where expats can receive tax breaks of up to 70% for five years. Milan is followed by Paris, where a less generous regime tied to particular jobs, grants expats 30% of their income tax-free.
Tax-breaks in continental Europe have been supplemented by burgeoning opportunities. Barclays, Citi, Goldman Sachs, and Bank of America are all expanding in Paris. Nomura has a trading presence in Milan.
Ferdinand Petra, Associate Professor of finance at HEC in Paris, says banks in Paris are increasingly hiring English-speaking staff alongside French natives. “It’s on a bank-by-bank basis, but we see more and more international students hired into banks in Paris,” says Petra. “With the cost of living in London and the value of the pound falling closer to parity with the euro, on a pre-tax basis you can typically have a higher standard of living in Paris than in London.”
With the pound down around 4% against the euro since the start of this year and with UK taxes expected to rise, the senior trader said the talk among he and his friends is all about the potential for better lifestyles elsewhere. "Most of us are thinking of moving to Milan," he says. "The tax advantage is huge. If I move there, I'll pay 15% taxes. Here, I pay 49%."
Another European trader who's long been based in the City says London appealed to Europeans because it was a non-judgmental location where meritocracy allowed high-performers to flourish. In his home country, he says people could tell from his accent that he came from a poor area. In London, that wasn't the case. It was liberating to work in the City, until Brexit changed the mood.
Some are skeptical that the predicted exits will transpire. Joseph Leung, managing partner at headhunting firm Aubreck Leung, says London bankers are going nowhere. "Thinking that the falling pound is going to deter people from coming to London is a knee-jerk reaction mixed with scaremongering," says Leung. "It won't happen, like the anticipated droves of people leaving London after Brexit didn't happen either."
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