Finance fragmented? Frankfurt and Paris as European financial centres after Brexit

ABSTRACT

Brexit creates an opportunity for alternative European financial centres. However, no comprehensive empirical analysis of the strategic positioning of actors within these financial centres has been conducted. In this article we outline findings from an extensive research project which we conducted in Frankfurt and Paris, two of the main ‘rivals’ to the City of London, in the aftermath of Brexit. We outline the core findings from this project and argue that the emerging competition between Frankfurt and Paris is shaped through four related axes: diversity, path dependency, territory and regulatory stability. Our analysis has implications for two bodies of literature within EU studies. First, inter-governmentalist and supra-nationalist approaches would benefit from interrogating more closely the contested sub-national politics of financial centres. Second, our analysis adds to a growing body of literature on European disintegration by interrogating the interaction of fragmentary and integrative dynamics in the sphere of European finance.

KEYWORDS:

• Financial centres
• Brexit
• finance
• disintegration
• Paris
• Frankfurt

Acknowledgements

We presented an earlier draft of this paper at a workshop organised by Simon Bulmer and Owen Parker and funded by the University of Sheffield’s Department of Politics. We thank the workshop organisers and participants who provided helpful comments, in particular Anand Menon, Scott James and Matt Bishop. We would also like to extend our gratitude to Charlotte Burns, Benjamin Bräun and Scott James for providing us with invaluable feedback on an earlier draft of this paper. David Marsh of OMFIF and Simon Bulmer also provided us with useful suggestions in advance our research trip to Frankfurt, as did Eric Albert of Le Monde prior to our fieldwork in Paris. We also thank our interviewees in Frankfurt and Paris for engaging with this project and the three anonymous reviewers for their helpful comments.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes on contributors

Scott Lavery is a Lecturer in Politics at the University of Sheffield and Research Fellow at the Sheffield Political Economy Research Institute (SPERI).

Sean McDaniel is a Doctoral Researcher at the University of Warwick.

Davide Schmid is a Lecturer at the University of Groningen.

Notes

1. At the time of writing (September 2018), Theresa May was attempting to secure her government’s ‘Chequers Deal’ at the EU level. This would involve alignment on goods but not on services. This proposal was poorly received by the EU authorities and faced trenchant parliamentary opposition in the British parliament. If a variant of Chequers fails, the prospect of a ‘No Deal’ scenario is one possible outcome. Alternatively, a general election or even a second referendum may be held to resolve the deadlock.

2. Other European financial centres of course may benefit from Brexit as well. Dublin, Luxembourg, Milan, Amsterdam and Zurich are regularly cited as possible candidates. We focus on Frankfurt and Paris due to the combination of the size of their financial centres and their political significance (Cassis 2018: 14). Future comparative research should interrogate the relation between Brexit and other smaller European financial centres.

3. There is no guarantee, of course, that Brexit will inevitably lead to supervisory convergence in the sphere of finance. Although the Commission has pushed for greater powers for the ESAs, some domestic actors – notably some NCAs and sub-sections of finance – are likely to oppose further convergence at the EU level. Future research should trace the emerging politics of post-Brexit financial supervision.

Additional information

Funding

Scott Lavery is Leverhulme Early Career Fellow at the University of Sheffield and gratefully acknowledges the financial support of The Leverhulme Trust. The authors also thank The White Rose University Consortium who supported this research at an earlier stage.