Finance hubs make €170bn a year for EU

EUROPE’S eight biggest financial hubs contributed more than €170bn (£150bn) to their countries’ GDP last year and employed nearly a million people, according to new research.

These financial centres – Amsterdam, Dublin, Frankfurt, London, Luxembourg, Madrid, Milan and Paris – play a vital role supporting governments, companies and societies across all 27 EU member states, the analysis showed.

Non-domestic companies have raised more than €66bn of equity through share offerings in seven of the finance hubs – excluding Luxembourg – since 1980, analysis by the International Regulatory Strategy Group shows.

Europe’s governments have also enthusiastically tapped these cities for debt finance and have €4.7 trillion in sovereign bonds outstanding in the eight hubs. Notable examples include Sweden’s €14bn bond sale in London and Italy’s €18bn auction in Luxembourg.

Stuart Fraser, chairman of the City of London Corporation, which commissioned the report, said the finance industry’s positive impact often went unrecognised.

“Financial services has a multiplier effect on the economy,” he told City A.M. “Europe needs financial services to finance the growth in its economies.”

Fraser said many of Europe’s banks could struggle to raise capital needed to meet tough new Basel III capital requirements from their domestic markets alone, making it critical to have a strong network of growing financial centres.

“Everyone in Europe has an interest in this,” he said. “We know there is some ‘London-bashing’, but we can demonstrate that the City is helping other economies and facilitates investment into other emerging European financial centres.”

London generated €62.5bn for the UK economy last year, while Paris contributed €45bn to France, the analysis showed.

The report highlighted the huge scale of growth capital raised in the cities for European businesses. More than 72,000 international corporate bonds have been issued in the eight financial centres.

It also pointed out benefits to citizens in EU member states from the pensions, savings, lending and insurance expertise in these centres.

“A well‐functioning financial sector can add around five per cent to GDP just from savings‐and‐borrowing effects,” it said, adding that if wages grew at two per cent or more, most EU states’ finance sectors had “considerable” further room for growth.

“This suggests that the common current perception that the financial sector has become ‘simply too big’ in many member states is simply a myth,” it said.