If Paris wants to position itself as a premier banking destination in the EU then France needs to elect a reformist government in the mould envisaged by leading centrist candidate Emmanuel Macron according to property and business experts in the city.
Macron leads in the polls with 23.8% of the first round vote on Sunday and is the favourite to clinch victory on 7 May ahead of right-wing National Front candidate Marine Le Pen, who claimed 21.5%. Macron’s policies include a pledge to cut corporation tax and to allow greater flexibility to renegotiate the 35-hour working week that could help lure companies to the country.
The French capital is trying to bring in more global financial firms and new talent to its business district, where there are currently seven skyscrapers under construction.
There will be an additional 4m sq ft of space in La Défense in western Paris by 2021, as well as further developments in Paris’ central business district.
As UK institutions prepare for expected limitations on what goods and services can be sold into the EU from Britain, banks are planning to move employees from the UK.
HSBC has already confirmed that it is moving 1,000 jobs to Paris, and with estimates suggesting as many as 10,000 financial services jobs could move out of the UK, Paris is keen to capitalise on the opportunity.
However, the outcome of the French election could be a deal-breaker for some, with many waiting on the sidelines before committing to a move.
A business environment
High taxes and tough employment laws can act as a deterrent for new businesses looking to set up in the French capital. They can also cause delays for firms with an existing base in France looking to recruit more talent. These need to be changed and relaxed if Paris is to successfully win businesses over.
Robin Rivaton, chief executive at economic development agency Paris Region Invest, says: “If the results are good and a reformist government comes into power then a lot of investors will change their minds about Paris, and they are already considering relocating here.
“With regards to personal taxation, France is very competitive compared to London, and improvements to capital gains tax for the next few years have been announced by the main reformist such as Macron and they are ready to implement some very important and drastic measures to lower tax and improve employment rules. These will be the first reforms that the next government needs to implement, which will have a direct impact on well-paid salaries, especially bankers.”
France is already preparing to lower tax. Current corporate tax is 15.5% for profit under €150,000 (£127,000), the competitiveness and employment tax credit represents 7% of gross payroll and a new system is planned for personal tax whereby income tax will be deducted at source in 2018. This means that any individual who goes to live in France will not pay any income tax this year.
Although candidates seem unanimous in their efforts to make Paris a better place for business, making changes to such a complex system can be challenging. The French political set up means it can be harder and take longer for any real changes to come into fruition.
Will Woodford, head of Savills in France, says: “In the UK you have the prime minister who sits in parliament, but the president in France doesn’t sit in parliament – they are independently elected and because of that you normally have someone who reflects the wish of the people. But if you become president without the majority on your side then its very hard to push things through and do what you want to do, because everything has to be voted for in order to go through.”
Uncertainty versus investment
Uncertainty surrounding the result could have an impact on the investment market. Research by corporate services provider Intertrust has found that 56% of real estate investors believe that property fund managers will review or delay their plans to sell real estate in light of a victory for far-right contender Marine Le Pen.
Meka Brunel, chief executive at Gecina, is confident that Paris will remain on investors’ hit lists despite the uncertainty surrounding the political landscape. She says: “Investors are always attracted when there is a clear vision on what the global circumstances and condition of their investments and their environment are. Political uncertainty is not helping business, but France in general and Paris in particular will continue to attract investors from all over the world.”
When François Hollande was elected president in 2012, investment volumes took a hit owing to concerns over a Socialist government. After he took office the United Nations conference on trade and development reported that foreign direct investment in France had plummeted by 77% to $5.7bn from $25.1bn.
Levels have since improved, with the latest reports of France’s foreign direct investment showing an increase to €32bn in February 2017. If Paris is to sustain momentum and maintain its position then it can not afford another political-prompted slump in investments.
Intertrust’s report also found that 91% of investors said that the French election would be a key driver in influencing their investment decisions for the rest of 2017. The report also highlighted the extent to which potential terrorist attacks in mainland Europe and the UK could influence decisions to review or delay planned property sales, with 42% citing this as a factor that would lead to a rethink. This impact could now be even greater following the attack at the Champs-Elysées on 20 April, the timing of which has been linked to the electoral debate.
The contenders
The possibility of a Le Pen victory on 7 May has provoked concerns that France could exit the eurozone, causing widespread market uncertainty, as seen in the UK.
Former investment banker Macron graduated from the École Nationale d’Administration – France’s most prestigious school for business and government officials – and at 36 was appointed by Hollande to run the Ministry of Economy in 2014. Now, aged 39, he is one of the youngest politicians to hold a cabinet position in Paris. He is pro-Europe, pro-business and presents himself as a reformist that wants to promote France as a global destination for investment.
Regardless of the result, the consensus on the ground in Paris is that the city is ready and open for business. Brunel adds: “I think there is a lot of opportunity moving forwards, and everyone is moving towards the same direction, which wasn’t the case before. I haven’t seen such a busy period despite the fact that we have a huge amount of uncertainty ahead.”
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