Bankers looking on Luxembourg for hubs post-Brexit

7 years ago - Published in Finance, Fundamental Analysis

Little Luxembourg is luring firms on the lookout for a post-Brexit foothold in the European Union, from JPMorgan Chase & Co. to insurance giant American International Group Inc.

Bloomberg News reports that while many find the Grand Duchy a multilingual paradise, would-be expats are being warned not to expect the cosmopolitan lifestyle they currently enjoy in London and that they should prepare to spend long hours on clogged roads.

Still, Luxembourg is light years behind London when it comes to things to do and places to hang out. The U.K. capital was last year ranked best city in the world for quality of life, ahead of Paris and New York, in a PricewaterhouseCoopers survey.

AIG in March said it will open an operation in Luxembourg following the U.K.’s vote to leave the European Union. U.S. insurer FM Global and Lloyd’s of London insurer Hiscox Plc., as well as private equity firm Blackstone also chose Luxembourg as their new EU hub. JPMorgan this month said it plans to move hundreds of London-based bankers to expanded offices in Luxembourg, Dublin and Frankfurt.

The latest to come clean is Investec, which is eyeing Dublin for its European base following Brexit – although, in all fairness, chief executive Stephen Koseff said the company will wait to implement its contingency plans until the rules governing the UK’s departure become clearer.
“This is the difficult thing about Brexit, the rules are very unclear,” he said.

Furthermore, while the latest influential Crane Survey from Deloitte suggested that the number of new office buildings completed in London hit a 13-year high in the last six months, the firm warned that London could face a slowdown in its pipeline of new office buildings as firms reassess their options for staying in the capital.

Luxembourg remains the world’s largest fund market after the U.S. and its swift adoption of EU laws and rules for so-called passporting fund administration and other services have swelled assets under management at its banks. Passporting is a massive draw post-Brexit because it allows foreign firms authorized there to do business in the rest of the soon-to-be 27-nation bloc.

The United Kingdom officially began the withdrawal process in March, with Article 50 of the Lisbon Treaty stating that the country has two years to complete the negotiations on the terms of its withdrawal.