In bloody wars there are often no winners. One side will conquer, but the extreme financial cost and crippling number of casualties often overshadows any victory. Brexit seems to be one of those battles, with the UK and the EU suffering as developments have dragged on to no prevail.
However, amidst the mass Brexodus, the diminishing public opinion of politicians and the citizens of the UK growing evermore tired at this drawn-out process, there is one party that seems to be benefiting from the political turmoil.
And the winner of Brexit is… Luxembourg?
Unsurprisingly, it’s not the UK or the EU. Nor, however, is it economic superpowers such as China or the US. So, who’s left? Little Luxembourg.
Nearly 50 companies (as of January 2019) are confirmed to be moving from the UK to Luxembourg to protect themselves from the implications of Brexit, the majority of which are financial firms. Alternative destinations of choice for other companies leaving the UK varies from Germany and the Netherlands, to Malta and Gibraltar, but Luxembourg seems to be more appealing to a lot of firms – here’s why.
Along with the likes of Monaco, Gibraltar and the Cook Islands, the slightly larger (but still relatively small) country of Luxembourg is a tax haven. This is the reason many large corporations flock to the European nation, as they can store large amounts of financial capital (in the form of profits) there and pay little in corporation tax.
More recently though, this has been less of the case in Luxembourg, as rates of tax for corporations reached (in some cases) what is charged in the US. This is down to recent investigations launched by European Commissions. Despite a crackdown and certain tightening of the previously relaxed tax laws, certain loopholes and exemptions can still be assured to companies meaning they end up paying considerably less tax than the actual rate dictates they should.
The Luxembourgian government aren’t foolish. There’s a dependency on one certain avenue of income to fuel the nation’s economy, and they know exactly where the money is coming from - the huge financial and tech firms that have registered their business in the country. And if there’s one thing that these huge corporations need, it’s excellent international connectivity in the virtual domain. With quick, low-latency internet connections, in fact the eighth quickest average broadband speeds in the world, Luxembourg offers an ideal hub to interact from and deal with the rest of Europe.
Locality and travel
Onto a connectivity of a different sort, Luxembourg has great travel links. Unlike a lot of major cities, the airport that services the country, Findel, is a mere 15 minutes from the city centre. Despite its modest size, it flies to a range of European cities such as London, Madrid, Rome and Amsterdam. Furthermore, given it’s situated in the heart of Europe, many countries are easily accessible via car, with the French, German and Dutch borders all barely a half-hour drive away.
Economic and political stability is another huge appeal of Luxembourg. There are over 140 different banks, 120 of which are branches of foreign banks holding an accumulative total of €760 billion in assets. As a founding member of the EU, Luxembourg is firmly integrated into European politics. This is beneficial as a country of its small stature has the alliance and backing of much larger global players. Luxembourg consequently has more international power than it would if it had independence.
In terms of domestic politics, things are a lot calmer in comparison to what we see in the UK. Every party understands the importance of maintaining a certain appeal and the need to offer corporations financial incentives to come into the country. As a result, there is little threat to a drastic overhaul of local legislation, regardless of elections and potential changes in governing parties. When firms arrive, they can be fairly certain of where they stand with the local laws for the considerable future.
Back to Brexit…
This all comes back to Brexit. Whether or not it will be beneficial to the UK is irrelevant at this point. What’s clear is that the uncertainty that surrounds it and the potential fear (no matter how small or unlikely) is enough to spook firms into taking precautionary measures.
What could happen once the UK does officially leave the EU is an inward business migration, where firms believe conditions in the UK are desirable again. Should this reversal of firms migrating away from the UK occur, Luxembourg could suffer at the hands of the UK becoming more appealing for corporations to operate from, but for now the economic turmoil Brexit is causing is strongly benefiting the central-European country.