Handing over to a new generation

Why has there been a handover at the top of Ernst & Young Luxembourg?

Raymond Schadeck announced last June that he would pass up the opportunity of serving a second four year term, even though he was entitled to it. I should add that at Ernst & Young you can retire between the ages of 53 and 58 and Raymond falls into this range. He saw his mission as being to complete the integration of the Luxembourg office in the worldwide network which now spans 87 countries; and this, he has certainly achieved.

Furthermore, we thought that the time had come to hand over quietly to the next generation. We believe the worst of the financial crisis is past and that it is the right moment to prepare for the post-crisis phase, even economic recovery. As incoming Country Managing Partner, I have surrounded myself with a largely new management team.

What are your strategic priorities for the immediate years ahead?

Firstly, our integration in the worldwide Ernst & Young network enables us to send staff much more easily to overseas offices. They now have access to international mobility programmes and foreign postings that is unique in our sector.  Equally, this mobility and increased flexibility will enable us to react more quickly.

Next, I would point out that of our 41 Luxembourg Partners, 14 have responsibilities across the EMEIA zone (Europe, Middle East, India and Africa).  I am personally in charge of private equity investment funds. Furthermore, the Partners in charge of real estate and regulated investment funds are also based in Luxembourg. Before our integration in the EMEIA structure, it was not possible for the Luxembourg office to position staff at a level where they would be in charge of several geographical zones.

Does this integration have an impact for the financial centre?

Yes, it is very positive for the financial centre, given that our sphere of influence has grown thanks to colleagues who have accepted international responsibilities. At the same time, we will continue working to integrate our office in the local economy so that Ernst & Young contributes to the development of the national economy.

One of our objectives is to reinforce our position in areas where we are already the market leader. As examples I would cite logistics, telecommunications and the hospital sector, where we are the leading consultancy in Luxembourg, not to mention the field of PPP (Public Private Partnerships). So we will also be increasing our focus on non financial sectors.

Looking at the future of the financial centre, we are facing a paradigm change.  In the past, the triggering event for gaining competitive advantage was often a legal niche where Luxembourg could retain sovereignty, or the rapid transposition of an EU directive into national law. In future, the triggering event will be superior competence and innovative products that are not offered by other centres, while continuing to make the most of Luxembourg’s natural advantages which are its political stability, the pro-business attitude of the government and authorities, the cooperation between public and private sectors and good labour relations. 

Niche product areas that we should reinforce are alternative investments such as private equity, microfinance and “cleantechs”. These technologies, linked to the protection of the environment, allow the fund industry to be combined with traditional industry.  Luxembourg should have major ambitions in this area and become a world leader in the field.

At present, the introduction of an automatic exchange of information is being debated by EU finance ministers. Would its introduction be a catastrophe for the Luxembourg financial centre?

Let us suppose such an automatic exchange of information were to be very rapidly introduced, it would certainly have an impact on private banking activity, causing some clients to feel worried and insecure since financial institutions would not have had the necessary time to prepare them for such a major change. Hence it is of paramount importance to reach a compromise within the EU that guarantees a relatively long transition period to the new regime. That said, the end of banking secrecy as we know it today, would not question the overall future of the financial centre. However, actors that had specialised in this particular client group would face more of a challenge in the future.

What other advantages are offered by the financial centre, apart from secrecy?

Three cards that Luxembourg can play are its geographical location in Europe, its multilingual work force and a business friendly administrative environment. The fact that different sides talk on a regular basis leads to a certain stability.
This interactivity between relevant parties, such as the Government, the supervisory authority, the agencies and trade associations such as Luxembourg for Finance, ABBL, ALFI and others, and the legal and consultancy firms, is a major advantage. Another undeniable argument, for any investor, is the guarantee that a new government will not change existing legislation from top to bottom. And last but not least, I would add that our small size enables us to react rapidly and to be innovative.

With regard to diversification of the Luxembourg economy, which areas could be developed?

We need to concentrate on products and services with high added value.  Concretely, that means increased investment in research and development.  Furthermore, we should continue our strategy of developing niches and I call to mind the priority sectors listed in the coalition government agreement. Examples include the logistics industry, “cleantechs” and everything to do with the knowledge economy. We need to put in place an ideal framework that enables people with high potential to set up business in Luxembourg. The beach and the seaside are not arguments that we can use!

Another area ripe for development is that of clusters, such as groups of sub-contractors for the automobile industry and the air freight sector, given the presence of Cargolux, a world leader. In this context, let us not forget another world champion, ArcelorMittal, the largest steel producer in the world. I take this opportunity to welcome the decision of the Luxembourg Government to appoint Minister of the Economy Jeannot Krecké to represent the State on the Board of Arcelor Mittal.