Brexit and its influence on Luxembourg’s financial sector

What should Luxembourg do to attract UK-based financial services companies worried about Brexit? Wort.Lu explains.

“We don’t need to do anything more in particular,” Nicholas Mackel, chief executive of the industry promotion body Luxembourg for Finance, told the British Chamber of Commerce lunch on Friday.

“We are open for business as normal…We are not out to poach business, but we are talking to financial institutions and trying to help them find solutions.”

Businesses dislike uncertainty, and there is virtually nothing sure about the size, timing and implications of Brexit. The low-key approach adopted by Luxembourg’s government and industry seeks to take the drama out of the situation, suggesting that the country offers calm, pragmatic solutions for accessing the EU market long term.

“We have a very attractive environment with a good, well-established reputation, a strong ecosystem of service providers and a responsive, business-friendly regulator,” Mackel reminded the audience.

These attributes are well known in the various financial business sectors, so he suggests there is no need to make an aggressive pitch for business. Luxembourg is often used as a hub to address European markets, both by groups based inside and outside the EU. UK businesses might need to beef up existing arrangements or open a new office to continue to be able to access the single market, just as US, Swiss and Chinese businesses have do.

This laid back approach is also realistic given Luxembourg’s size. The country might struggle to accept quickly a new operation employing thousands of people. “We are not expecting entire banks to move here (at least not at the start), but we could see chunks of activity migrate here,” Mackel explained.

He was keen to point out that the country has the capacity to easily accept hundreds of new people without problem. He suggested that prime office space with room for 17,000 people is currently on the market, with more to come next year.

By underlining the stability and calm of Luxembourg this subtly highlights the doubts surrounding doing business in the UK.

“We don’t know if banks will be able to serve individual or corporate clients from London in years to come,” said Mackel. “To end the uncertainty they might need an office in Europe to serve the EU market.

Financial services groups are comparing the pros and cons of the various financial centres, and Luxembourg features in these discussions.

Speaking at the ALFI autumn conference on Tuesday, Claude Marx, head of the CSSF, suggested that Brexit-related decisions are imminent. “We have had, and are continuing to have, discussions with numerous UK-based institutions,” he said, adding he expected groups to adjust their strategies in the “coming weeks or months.”