The Eurocentric: Paris Benefits From London’s Demise As Tech Leader

alessio patron/marius christensen

London’s woes continue as its global reputation wanes. Now, Paris has passed London as Europe’s tech hub. London may need to grow accustomed to losing its competitive edge since Brexit, as this is not the city’s first time being surpassed by another European city. In 2021, Amsterdam passed London to become Europe’s largest trading center and was nicknamed the new financial capital. Paris also benefited, though, and saw an increase in trade, along with other cities such as Frankfurt and Dublin. This is a result of Amsterdam deterring some firms from relocating to the city due to a cap on bonuses for financial sector employees.

London once again reclaimed this title in 2024, but this demonstrates that London is not untouchable as it previously was. Furthermore, not all hope is lost for London. Last year, London led Paris for investments in Artificial Intelligence, raising $3.5 billion dollars last year, $1.1 billion more than Paris. Parisian tech firms, however, are growing in value much faster than firms in London, with the value growing 4.2 times as much in Paris over London between 2017-2024.  

Brexit’s financial impact

Brexit is often blamed as a significant contributing factor to the United Kingdom’s economic challenges, and this is logical. When the United Kingdom narrowly voted to leave the European Union in 2016, the nation lost benefits that come with European Union membership. A significant benefit for the United Kingdom was its inclusion in the single economy, which allowed the United Kingdom to be included in trade deals. After Brexit, the United Kingdom must negotiate all trade deals alone. This is significantly more difficult considering the size of the British economy compared to the European Union’s economy. As the European Union economy consists of the national economies of twenty-seven member states, this makes it easier to negotiate trade deals that are more advantageous for the member states as a collective group rather than each nation attempting to draft trade agreements alone. 

While London is a massive city that dominates internationally as a financial center, Paris can still compete, making it a worthy opponent. Both cities are not only the capital of their respective nations, but also the dominant economic hubs of each nation as well. This helps companies attract not only national but also international talent.

Britain’s taxes

Great Britain’s woes will likely continue due to its increased taxes on the wealthy, including a proposed 40 percent tax on all overseas income. While taxing the rich may at first seem like a great way to increase tax revenue, these proposals fail to account for an important variable. British elites are free to move to other nations, taking their wealth with them. It is expected that this trend will continue, adding to challenges in collecting tax revenue for the government. It is notable as well that Great Britain is the only nation amongst the top ten wealthiest that has seen a loss of 9 percent of millionaires in the past decade.

Besides higher taxes for the rich, the middle class is being impacted as well. Initially put in place by the Tories, Labour has continued the freeze on income tax thresholds. This negatively impacts individuals who are far from being millionaires yet find themselves pushed into higher tax brackets due to salary increases meant to provide relief from inflation. If individuals are paying a higher portion of their salary to the government due to the national government refusing to raise tax thresholds, these citizens receive no relief.

European Union’s Lost Potential

While the European Union may be tempted to celebrate Paris passing London, the European Union needs to instead look at the bigger picture. Europe as a continent is losing the fight internationally in the tech world. Europe as a whole used to be responsible for 30 percent of the tech sector worldwide in 2000. This market share fell to only 7 percent last year.

The European Union’s difficulties are a result of refusing to allow member state governments to provide subsidies to firms. This is seen as a way of safeguarding fair competition between member states in the single economy of the European Union, but the downside is that it makes it difficult to compete internationally.

This is slowly changing, as in late June of this year, the European Union will allow member states to partially cover the utility bills of industries that are energy-intensive. Smaller member states of the European Union are not as pleased as France and Germany, arguing that smaller nations cannot provide as much financial assistance as larger nations can. This will potentially make it difficult for smaller member states to compete within the EU single market. Until the European Union further relaxes regulations in order to also include helping tech startups, the EU may continue to lose market share in the tech industry.

Conclusion

London will continue to face more competition not only in Europe but also worldwide. Brexit hurt London’s competitiveness; however, this is not the only reason. Britain’s attempt to raise taxes is causing wealthy individuals to leave, taking their money with them rather than continuing to invest in the economy. Great Britain must review its tax policies and see whether it is really worth it if the individuals who were supposed to pay more taxes continue to leave, potentially also impacting investments in the city. Great Britain will also need to find a way to help ease the tax burden on the middle class instead of repeatedly freezing income tax thresholds, wiping away any salary increases meant to help families survive inflation. London needs to find a way of once again competing on an international scale, despite no longer having the benefit of being located within the European Union. As there is no current consensus to join the European Union, London cannot count on this in order to increase its competitiveness.

Simultaneously, it has also become clear that the European Union must do more to help companies compete internationally. Not allowing national governments of member states to provide subsidies makes it difficult to compete with nations that are outside the bloc. This is slowly changing as can be seen with partial coverage of utility expenses, but more must be done in order to help provide funds that allow for tech innovation to occur.