Barely had the results of the EU referendum sunk in when a doctored photo of the famous banner that hangs from Madrid’s Cibeles palace began doing the rounds on social media. The “refugees welcome” sign that adorns the offices of the city council had been mischievously prefixed with a single word: British refugees are welcome.

18 months after Brexit, Spain is happy

Eighteen months on, despite enduring bafflement over the to leave the EU, the Spanish capital is getting down to business. Refugees are welcome, and so are the companies and revenues that London is set to lose over the coming years. There is no overt glee in Madrid, no licking of lips or cooking up of slogans based on dubious stereotypes, but there is a growing acknowledgement that some of the City of London’s losses could be this city’s gains.

“We think Brexit isn’t good for either party,” said Enrique López Galán, an economic and business development adviser for Madrid’s city council. “The idea that a load of businesses are going to leave England will depend on whether a hard or soft Brexit is negotiated.” In the meantime, the council is making plans. It will open an office in February in central Madrid where an English-speaking team of experts will work to attract foreign investment, and it is also in the process of hiring a promoter to drum up business in London.

“Looking at the way the negotiations are going, it looks like the businesses that are going to be most affected are service industries, the ones that need authorisation or a deal to operate in the European economic area, so financial services; aeronautic businesses,” said López Galán. Anti-Brexit protesters wave EU flags outside parliament in London. Adam Austerfield, the director of the global markets team at LSE Enterprise and national vice-president of the British Chambers of Commerce in Spain, believes some Spanish financial services firms concerned over passporting rights may relocate some of their operations from the UK to Madrid.

He says it is doubtful, however, that the Spanish capital will pose a threat to Paris and Frankfurt when it comes to luring financial services from and that its main competitors will be Amsterdam, Dublin, Rome, Milan and Berlin.“Even Dublin and Amsterdam will only pick up some parts and mainly for fiscal reasons rather than domestic markets,” he said. “While Madrid will probably reabsorb some financial services from existing investors in the UK, it’s unlikely to be a scaled-up operation or even continental HQ of the big investment banks such as JP Morgan or Morgan Stanley, for example.”

Madrid is a great place to work, but taxes suck

Others are more sceptical about Madrid’s post-Brexit offer. “There’s a lot of excitement about this, but I have my doubts that the level of excitement is going to be matched by reality,” said Federico Steinberg, a senior analyst at Spain’s Elcano Royal Institute. “Basically, there’s this narrative that goes: ‘Madrid is a great place to live’, and that’s actually true. Whenever expats are asked where they’d like to live, Madrid tends to come up because of the quality of life, the weather and the food.” Quality of life may not be enough, however, especially as office space remains a problem and the Operation Chamartín development will take a while to build, he said.

“That’s one constraint. Then people argue that the tax treatment and labour market regulations could be improved if you really want to bring more people onboard,” Steinberg said. “In practical terms, I think that means there are other cities that are probably as qualified or even better qualified.  Englishis an issue, so Ireland is obviously better prepared in that sense, and then you’ve got Frankfurt for the financial system, or Amsterdam. You’re closer to the action than in Madrid.”