Spotlight on Europe In the current environment there are many challenges for a business looking to expand. Many companies settle for survival, others look for opportunities to grow. As companies seek new markets, products, channels and ways of operating, what is influencing their decisions and what are the opportunities for Treasurers in Europe? HSBC asks these questions of Jeroen Bakhuizen, Head of International Subsidiary Banking, Europe.
How is Europe, as a centre of trade, faring in comparison to other regions in terms of treasury activity? One of the key differences between Europe and other regions is the existence of the eurozone. It is an advantage for many companies looking to rationalise their treasury operations. US companies that have been active in Europe for a long time tend to have a sophisticated organisational setup; almost all the large ones have regional treasury centres (RTCs) with regional decision-makers located in Europe. Because of the eurozone and the sophisticated banking systems on offer they have been able to centralise and rationalise across the whole region. Many large companies – of US$20bn-plus turnover – have been doing this for some time. With the banking and economic infrastructure
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in Europe making it relatively easy for companies to adopt a regional treasury model, a similar trend is now seen with companies of US$500mn to US$5bn revenue undertaking the same exercise. The key RTC locations, in no particular order, are the UK, Netherlands, Switzerland and Ireland, with Belgium and Luxembourg also now commonly seen as locations for these hubs. With more discussion on ‘substance’ on the agenda as part of the OECD’s BEPS tax initiative, treasury locations are having to move to physical operating locations, which clearly makes the choice of site highly important. The transport links available in these locations, particularly those on the continent, is an added strength which they offer. While Europe does not have doubledigit GDP growth, it is stable and
is clearly an advantageous region in which to rationalise business and look for synergies. This exists for Asia and Latin America too, but achieving a truly regional set-up becomes more complex in these regions because of the numerous currencies used, whereas European flows are mainly covered by US dollar, British pound, euro and, to a lesser extent, Swiss franc, Turkish lira and Polish zloty. With the ongoing eurozone difficulties, demographic changes and Brexit, how will such events affect appetite for continued foreign direct investment (FDI)? Given how swiftly the region stabilised post the Greek financial crisis, we remain confident that appetite for FDI into Europe will be maintained. Pre-UK