Jamie Dimon in Paris Shows London's City Limits

French Finance Minister Bruno Le Maire is under no illusions as to the reasons behind Jamie Dimon’s latest push into Paris, where JPMorgan Chase & Co. has just cut the ribbon on the new headquarters for its continental trading hub. While citing President Emmanuel Macron’s efforts to support financial services in France, Le Maire’s most emphatic praise was for the U.K.’s decision to leave the European Union five years ago: “Thank you...Brexit.”

While JPMorgan’s French presence goes back centuries, its new six-floor trading center is inseparable from Brexit shenanigans. London remains Europe’s biggest financial center and the world’s second-biggest, according to research firm New Financial. But leaving the European Union has chipped away at the City’s network effects, allowing  multiple hubs to coexist from Paris and Frankfurt to Amsterdam. 

U.S. investment banks that relied on London for decades as a launch-pad into Europe’s single market have had little choice but to open entities on the continent, capitalize them and staff them to avoid losing frictionless access to the bloc: As of March, EY estimates 7,600 jobs and 1.3 trillion pounds ($1.8 trillion) in assets have been relocated.

The hyper-centralization of the City, with every strand of financial, legal and accounting services under one roof, is not the be all and end all anymore. While European financial regulators are cracking the whip to make sure jobs are on the move, they’re not the only catalyst. Covid-19 has showed that it’s possible to work from different locations, if not ideal. Not being in London is no longer a career-killer. Talent pools outside the City, such as Birmingham where Goldman Sachs Group Inc. is opening a new office, are seen as worth capturing.

Beyond finance, the pandemic accelerated moves to the continent. An estimated 1.3 million foreign-born workers left the U.K. during the pandemic. 

Where do Paris’s own “pull” factors fit into this post-Brexit, post-Covid world? Its fans tick off a list that’s well-known: A set of tax breaks and reforms rolled out by the Macron administration to make hiring more attractive, a talent pool trained in elite engineering schools and the mix of infrastructure, culture and schools that global cities need to attract high-flyers. JPMorgan isn’t alone: Bank of America Corp. has moved 400 employees to Paris since Brexit.

Less cheery is France's record as a domestic financial market: HSBC Holdings Plc recently pulled out of French retail banking after a long and painful sale process, and the recent initial public offering of French digital-music company Believe SAS got off to a rough start.

But the real opportunity set is for the euro area as a whole, with more integration of various hubs via a true capital markets union that would bring together the different specifics of each hub, from Amsterdam’s high-speed connections to Germany’s network of small and family businesses.

One example of the continent’s potential for further network effects is Euronext NV, whose purchase of Italian exchange Borsa Italiana has made it the largest listing venue in Europe. The deal means the exchange operator will derive more than a third of its sales in Italy, on top of existing business in markets from France to Portugal. It will have a clearinghouse for the first time as well as a securities depository and bond platform.

The virtuous cycle of more EU stimulus and closer integration after Brexit should bring growth — UBS analysts expect European stock-trading volumes to rebound by 4-5% per year in 2022 and 2023 — provided regulators and politicians put aside internal squabbles and cooperate.

But in the meantime, the post-Brexit flow of jobs and assets is the story of a gradual chipping away at London’s dominance via multiple financial centers. It’s one that the U.K. is unlikely to let happen without a fight. Even if JPMorgan today employs about 19,000 people in the U.K. versus an expected 800 in Paris at the end of 2022, only the most ardent Brexiter could brush this off as a nothingburger. London’s City limits are now glaring.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Lionel Laurent is a Bloomberg Opinion columnist covering the European Union and France. He worked previously at Reuters and Forbes.

©2021 Bloomberg L.P.

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