Britain Isn’t Just Losing Brexit. Europe Is Winning It.

Only a few days after Airbus announced it may be leaving Britain, the country’s top diplomat delivered one of his more undiplomatic remarks: “Fuck business,” Foreign Secretary Boris Johnson said. That was four months ago, in the heat of Brexit’s uncertain summer—a day before Amazon’s U.K. chief warned of “civil unrest,” two weeks before Johnson resigned in protest, and a month before the European Union rejected Prime Minister Theresa May’s preliminary proposal.

In the four months since, even as public opinion has grown more split and as prodding from hard-liners has continued, some of this uncertainty has gone away. Just last week, the EU’s top Brexit negotiator, Michel Barnier, declared a deal “within reach,” and it appears that 30 Labour Party members of Parliament will now throw their support behind May to pass some final proposal. Nevertheless, with the recent announcement that BlackRock and JPMorgan Chase will join Bank of America and Citigroup in redirecting thousands of employees to the continent, it is clear that the bleeding of business from Britain goes on.

The big question now seems to be whether the U.K. and the EU can agree to a “Canada model” arrangement, which would leave Britain beyond the continent’s single market but with limited free trade benefits, or whether they will agree to nothing at all—leaving the U.K. to crash out of the EU in a doomsday no-deal scenario. Either way, British-based employers are girding for a future without the ability to conduct frictionless business in the 30 countries that comprise the European Union and the European Economic Area.

Leading the exodus of jobs and cash are London’s many investment banks and asset management funds, such as those above, which are expected to send 10,000 jobs and billions of dollars in annual tax revenue overseas. Not far behind the financial services sector is the manufacturing sector, as one recent report shows a second consecutive month of staff cuts in factories across Britain. The technology industry, too, is feeling the pain of Brexit, as founders leave a United Kingdom that has lost its grip on foreign talent and capital. Perhaps the most disconcerting of all is the potential damage to the food services industry, whose farms and processing plants—largely of dairy, eggs, fish, and cereals—rely on a 40 percent EU-born workforce.

But Britain’s job losses are not just about Brexit. While the decision to leave the single market, resurrect tariffs with trade partners, and boot foreign workers has certainly left the U.K. a less desirable place to do business, much of the movement out of the U.K. has been a matter of pro-business reform and repositioning by EU competitors. The biggest winners of Brexit—Dublin, Frankfurt, and Paris—have proved to be at least as effective at pulling business in as the Brexiteers have been at pushing business out.

Ireland has been at it the longest. Since the 1990s, when business-friendly reforms gave birth to the Celtic Tiger and a decade of double-digit growth, Ireland has made offers foreign employers can’t refuse: low taxes, lax regulation, and access to the single market.

The corporate tax rate gets the most attention. At 12.5 percent—a little over a third of France’s 33.33 percent, less than half of Germany’s 30 percent, and still lower than Britain’s 20 percent—Ireland has become the most attractive tax haven in Europe. Coupled with its lax regulation, having dismissed controversial cases against Apple and Facebook, Ireland has become a desirable regulatory destination, too. And as Brexit’s formal departure date approaches, Ireland’s access to the single market has drawn in the British businesses that would suffer without it. This month, the Central Bank of Ireland announced that it had received more than 100 moving notices from London-based financial institutions. And one week later, to drive the point home, the central bank announced that this year’s projected GDP growth of 4.7 percent would actually be more on the order of 6.7 percent.

It’s hard to capture the vibrancy of Dublin, where new passport applications, new people, and new pubs pop up daily. The Irish Times’s approach to understanding the phenomenon is perhaps the best. For the past two and a half years, the paper has kept count of the number of cranes that can be seen from its city-center office. Last month, it announced a record-breaking 93.

In certain respects, Frankfurt can’t compete with Dublin. It doesn’t have the low tax rates, it doesn’t have the look-the-other-way regulation, and, most disadvantageously, it doesn’t have the English language. But what Germany does have—the largest economy in Europe, strong and steady economic growth, and a healthy and expanding manufacturing sector—has been enough to lure many British-based businesses. One recent report from Germany Trade & Invest, an economic think tank of the German government, showed a 21 percent jump in foreign direct investment in Germany from the U.K., with prominent firms such as Morgan Stanley, Goldman Sachs, and Standard Chartered set to relocate thousands of jobs to Frankfurt, where they will establish their new European headquarters. Another economic think tank, Bruegel, projected the U.K. to lose 30,000 financial services jobs due to Brexit—and expects Frankfurt to be the top recipient. As London, the historic capital of European finance, finds itself outside the single market in 2019, most indicators suggest that Frankfurt—which benefits from the presence of Germany’s powerful financial industry, the German stock exchange, and, critically, the European Central Bank—will take its place. For the London bankers who are not already familiar with the historic capital of German finance, Frankfurt’s financial lobby also reached out to prospective movers with an awkward English-language advert titled “Fall in Love with Frankfurt”: Nice to meet you. The name is Furt, Frank Furt.

German job poaching has also taken aim at London’s tech sector. The campaign began in the summer of 2016 as an eye-grabbing, pyramid-shaped, rainbow-colored van roamed the streets of London with the message: “Dear start-ups, keep calm and move to Berlin.” Since then, Silicon Allee, as it’s called, has blossomed as founders of financial tech, health tech, and social media companies have come in waves to one of Europe’s cooler and cheaper cities.

In Germany, as in Ireland, most of the business being won from Britain appears to be more a matter of long-term policy planning than a result of sudden opportunism. Apart from Germany’s cheeky ad campaigns and an unenticing campaign by Ireland’s Industrial Development Authority, neither country has done much in the way of serious policy reform at Brexit’s expense. As Robert Hermann, the CEO of Germany Trade & Invest, said about Germany’s jobs strategy, “There’s no philosophy of schadenfreude, of taking advantage of what is an unfortunate time for the U.K. For us, it’s just business as normal—in new conditions.”

In France, however, where the results are quite similar, the situation is substantially different. Elected less than a year after Britain voted to leave the EU, French President Emmanuel Macron has long positioned himself as an anti-populist crusader and has spent much of his time in office targeting Brexit and the forces that permitted it. This much has been clear both in his rhetoric and his reforms.

In the same month that he called Brexiteers “liars,” Macron rewrote France’s labor laws. Ramming through deregulation by executive order, Macron sought to allow employers to fire more freely and thus, the hope was, hire more liberally. Shortly before that, he had slashed the solidarity tax on top earners, giving executives every reason to begin looking across the Channel. The labor and tax reforms have facilitated a successful financial services blitz, which has seen BlackRock, JPMorgan Chase, Bank of America, Citigroup, HSBC, and Nomura all commit in recent weeks to more hirings in and relocations to the French capital. Ultimately, it is projected that these reforms will contribute to approximately 3,500 financial services jobs redirected from London to Paris, which already boasts a strong financial services scene and three of Europe’s biggest banks: BNP Paribas, Crédit Agricole, and Société Générale. And for good measure, the young leader has also slapped a charm offensive onto his financial services campaign, sending his deputy finance minister on a London roadshow to “explain the status of the reform package that has been launched by the French government.”

This is not the only charm offensive Macron is undertaking. Perhaps more notable is his rebranding effort of France to create a “start-up nation.” Part of this is supported by real reforms and investments, such as his creation of a new tech visa and the funding of more than $1.7 billion in artificial intelligence research. Following this news, Amazon, Google, and Facebook announced plans to expand operations in Paris. Part of the charm offensive is supported by France’s pre-existing educational and technological infrastructure, including good engineering universities such as the École Polytechnique and well-established start-ups such as BlaBlaCar. And, of course, part of it is show, as Macron throws glitzy tech conferences and poses with two smartphones in his official portrait.

But the most important part of Paris’s appeal may be the part that is organic, romantic, and needs no pushing. One of the biggest assets for the city of lights is its quality of life—its wine and cheese and clichés. Impressive as Dublin, Frankfurt, and others may be, Paris has a certain je ne sais quoi that is making it nearer and dearer to London’s bankers and technologists. And as 10,000 positions move from London to Paris, it will become increasingly apparent just how enchanting Paris really is.

Today, it’s unclear how many jobs Britain will ultimately lose. Mark Boleat, the former chairman of Britain’s financial services community, predicted the U.K. could hemorrhage 75,000 jobs over the course of the next few years. London Mayor Sadiq Khan placed the number at 500,000. Nor is it clear to whom Britain will surrender its share of the global economy. In recent months, Spain rolled out a #ThinkMadrid campaign that advertised the city’s affordable housing, welfare programs, high-speed rail, high-tech jobs, and sunshine. Amsterdam has recently appeared as a contender as well, having won the bid for the European Medicines Agency and having drawn in the Japanese manufacturing giant Panasonic. The Baltic capitals—Tallinn, Estonia; Riga, Latvia; and Vilnius, Lithuania—are touting their highly educated publics and high-tech sectors, too, as they come to compete in the Brexit sweepstakes.

What is clear, however, is that Britain has more bad days ahead. Should we wind up in a no-deal scenario, an outcome that remains quite possible, the U.K. may find itself facing a simultaneous financial crisis, housing crisis, and food crisis. Even if a deal is reached, one that can provide a bit of tranquility to this drawn-out episode of volatility, there is no saying whether Britain will be able to win businesses back. The decision of Panasonic to leave, for example, was rooted in the fear that Japan may label the United Kingdom a “tax haven” should Westminster lower taxes after the final deal goes through. If that were to happen, Panasonic and the many other Japanese businesses with European headquarters in London may wind up facing back taxes at home. Similarly, a survey of German companies showed little interest in returning business to Britain even in the event of “tax reforms and reductions.”

Perhaps the only thing in Britain’s corner after Brexit goes through will be the comforting certainty that it has already occurred. Why move to Ireland, the Bermuda of Europe, if it, too, may be targeted as a tax and regulatory haven? Or worse, why move to Paris if you may have to deal with the perennial possibility of President Marine Le Pen? Why go to Frankfurt with the Alternative for Germany on the rise? Why Amsterdam with Geert Wilders not far from the headlines? Still worse, why go to the Baltics with Russia champing at the bit?

In the short term, none of these concerns appears likely to stem the flow of talent and capital out of the U.K. In the long run, however, it is quite possible that today’s challenges to Britain will reach the rest of the continent. And so there can be no guarantee that the next move of Britain’s businesses will be their last.