Brexit Drains Swamp in London, Creatures Head to Luxembourg

In its report on the “world’s worst corporate tax havens” last December, Oxfam rated Luxembourg in 7th place, behind Bermuda, Cayman Islands, the Netherlands, Switzerland, Singapore, and Ireland.

But the “City of London,” a largely autonomous square mile within London where the threads of global finance meet, was given a special mention: The number one “unexpected absence” from the list of the top 15 worst tax heavens. Oxfam’s report put it this way:

The UK’s City of London is at the centre of a web of Crown Dependencies and Overseas Territories, over which the UK wields both official and informal influence. The 14 Overseas Territories include the Cayman Islands, the British Virgin Islands and Bermuda, and Jersey is one of the UK’s three Crown Dependencies. As Jersey Finance, the official marketing arm of the Jersey offshore financial centre, puts it, “Jersey represents an extension of the City of London.”

There were plenty of reasons for financial outfits of all kinds to settle in the City of London. But now that Brexit will likely throw a monkey wrench into unfettered access to the European Union for these firms, they need to head to the continent. And tax haven Luxembourg appears to be a big beneficiary in a post-Brexit world.

Nicolas Mackel, the head of Luxembourg’s financial development agency Luxembourg for Finance told Reuters today that private equity firm Blackstone was among “three or four” major private equity firms that picked Luxembourg for their EU subsidiaries. But he wouldn’t name the other PE firms since they hadn’t yet made their decisions public.

One bank also decided to set up shop in Luxembourg, he said without naming names, while “10 to 20” are planning to expand their current operations in Luxembourg. He wouldn’t say which banks, but they all have operations in Luxembourg, such as J.P. Morgan Asset Management Luxembourg.

Four or five “big name” asset managers were also planning to set up operations in Luxembourg, Mackel said, following Prudential Investment Management and international asset manager M&G Investments in their decisions.