The question of which European cities stand to gain the most if financial firms leave London due to Brexit has fascinated policymakers and the media alike since the UK voted in June to leave the EU.
Will it be Paris, with its unrivalled liveability but restrictive labour laws? Industrious but dull Frankfurt? Liberal but peripheral Dublin? Or Amsterdam, the compromise candidate?
As this list implies, however, the focus has been almost entirely on cities that could plausibly compete for London’s crown as a global financial hub. Yet the biggest beneficiaries of Brexit – if they are smart – could in fact be some of the Europe’s smaller centres.
It is a simple numbers game. More than 360,000 people work in financial services in London. If 1% of those jobs were to move to Frankfurt, that city’s financial workforce would grow by 6% – a big increase, but possibly not a game changer.
By contrast, the same number of jobs moving to a more obscure city could be transformative – particularly if they are in high-tech, high value-added sectors. So, how might a smaller centre go about tempting financial firms away from London, not to mention the various other cities vying for the business?
Offer something unique. That could be access to a relatively untapped talent pool in eastern Europe or one of the world’s most fintech-friendly regulatory regimes.
E-money firms can get licences in Lithuania in just three months, as well as direct, real-time access to EU payments infrastructure. A ‘regulatory sandbox’ gives start-ups the freedom to develop. The central bank is even considering becoming the first in the world to give official recognition to bitcoin exchanges.
Getting everyone on board locally is also important. Joined-up policymaking is easier in a country with a population of just 3 million, as is legal and regulatory flexibility.
Finally, there is the challenge of getting the word out – no small hurdle for a country few people could place on a map and with a capital few have heard of.
Here, Lithuania has an ace in the pack in the form of flamboyant poker player and MEP Antanas Guoga. In July, he took advantage of the Brexit vote to write to thousands of UK-based banks and fintechs inviting them to Vilnius. The response, apparently, was impressive.
Policymakers should take note – Brexit is not just an opportunity for the big boys.