Paris and London’s wealth loss is Dubai’s gain

By Lionel Laurent

Springtime is here in Paris. Cafes are bustling, the economy is showing signs of improvement and a shiny (stair-free) metro expansion is making the 15-minute city even more accessible. Yet there’s also the faintly audible sound of wealth on the move: Two locals inform me of plans to leave, one to Dubai and the other to Switzerland.

In a similar vein to London’s fleeing non-doms and Brexit banking exiles, Paris is going through its own dose of ras-le-bol fiscal — the moment when the proverbial tax straw breaks the camel’s back — in President Emmanuel Macron’s twilight years. Taxes are going up on big business and the wealthy; Marine Le Pen is the presidential contender to beat in 2027; parliament is gridlocked and still fighting over pension reforms that tore the country apart in 2023. After an extraordinary run for Paris as the euro area’s investment-banking hub of choice, with the number of French financiers on seven-figure salaries almost doubling in four years, hiring plans are being put on ice.

What you might call “peak Paris” marks a new phase in the fight for global talent — one in which Europe is on the back foot. Paris won the Brexit battle for corporate and investment bankers thanks to tax incentives and pro-business reforms, JPMorgan Chase & Co.’s France chief Kyril Courboin told a Bloomberg conference last week, pointing to his own firm’s expanded French footprint to 950 staff from 230 a decade ago. However, the war for private equity and hedge funds is being lost to centers beyond the Paris-London commuter belt like Dubai, where there’s no income tax, less red tape and a burgeoning billion-dollar fund club. Neighboring Abu Dhabi is also “nailing it” on tax, according to hedge-fund boss Paul Marshall. Madrid and Milan are doing well in the nomadic-wealth stakes, yet even they can’t hold a candle to the United Arab Emirates, which attracted more than 6,700 millionaires last year, according to London-based consultancy Henley & Partners.

I’ve argued before that competition from the UAE isn’t to be sniffed at. Its recent resurgence seems to have sturdier foundations than the debt-fueled property binge of the 2008 era, with serious efforts at creating a financial center, diversifying away from oil wealth and expanding tourism — even if the blend of cryptocurrency wealth, dodgy influencers and historical money-laundering issues are obvious risks. It’s not just for hedge funds, either. Revolut Ltd. Chief Executive Officer Nik Storonsky is spending more time there as the UAE invests in his fintech firm, and Dutch software firm Bird is setting up a hub there to escape regulatory and hiring obstacles in Europe. Young consultants are trading Duesseldorf for Abu Dhabi.

And while it might be tempting to say “good riddance” or shrug one’s shoulders, the fact is that taxpayer peregrinations can have big impacts down the line. The top 10 per cent high-earning households in France account for more than 75 per cent of national income tax receipts; in the UK, it’s more than 60 per cent. The more governments engage in what one French member of parliament called fiscal “butchery,” the greater the risk of eroding the tax base further. JPMorgan’s Courboin reckons Paris has time on its side, pointing to 2030 as the “smell test” for when eight-to-nine-year tax breaks run out for the most recent cohort of Brexit movers. That might be an optimistic assessment considering the size of France’s deficit, the looming date of the next presidential election in 2027 and the fact that US President Donald Trump’s tariff barrage is due to start in earnest soon.

Defensive responses, like exit taxes, might soften the pain of “peak Paris.” So might waiting for the shine to come off the UAE if regional geopolitical tensions worsen. Yet Paris also needs to devise a new equity story beyond its trademarks of tourism, luxury and politically connected corporations — especially given the dearth of new arrivals on its stock market, as the above chart shows.

One option is Europe: France still has potential as a financial hub if the continent makes a serious go of integrating its disparate markets and unlocking trillions in savings. The other is to make Paris a more livable place to tempt young exiles back when they want to start a family, which is one of France’s strong points thanks to childcare tax credits. Converting office property into homes, investing in infrastructure and doubling down on education and engineering talent seem more within reach than competing with tax-free cities. For now, expect the ras-le-bol fiscal to continue.