The starting signal was sounded a year ago: the British people decided in a referendum on June 23, 2016 in favour of the United Kingdom leaving the European Union and therefore set a process in motion that can already be described as historic. The consequences are so far-reaching that even accomplished experts can hardly gauge effectively how the interaction between the UK and the countries in the EU will change. Only one thing is certain: much of what has been considered certain up to now will be put to the test.
That also applies to the question as to where the financial centre of the European Union will in future be located. The place to be has been London up to now. The race for a successor has already started some time ago and the competition is tough: Amsterdam, Brussels, Dublin, Frankfurt, Luxembourg, Paris and Warsaw are all doing their best – each city in its own way – to become the hotspot of the international finance industry.
Long before the UK made its decision, Frankfurt made initial preparations: to have a voice and be articulate, to provide interested parties with considered answers, to seek dialogue – that is a fair description of what representatives from the Hesse state government and the Hessen Agentur /Hessen Trade & Invest as well as from Frankfurt Rhein Main and Frankfurt Main Finance have wanted to achieve from the outset. With success, as the round table discussion with their representatives shows: those taking part comprised Wolf-Dieter Adlhoch, Head of the Brexit Office in the Wiesbaden State Chancellery, Dr. Rainer Waldschmidt, Managing Director of Hessen Agentur/Hessen Trade & Invest, Eric Menges, Managing Director of Frankfurt Rhein Main GmbH, and Hubertus Väth, Managing Director of Frankfurt Main Finance.
After a year of intensive discussions about the Brexit: how has Frankfurt positioned itself to score points in the competition among European financial centres?
Dr. Rainer Waldschmidt: Communication was the key from the very beginning. As early as during the discussions about the referendum, we already started to bring together important representatives from city and state institutions around the table for talks so as to agree at a very early stage about the concerted action we should take. One important point, for example, was that we don’t focus on Frankfurt as a city, but talk about the Rhine-Main region, because many aspects relating to the issues of talent, infrastructure and quality of life gain their relevance from the circumstances and realities within this larger region.
Eric Menges: It helped us considerably that we had already programmed a complete website before the Brexit decision, which we were able to set up live on the morning the results were announced. That involved a certain risk: the effort might well have been in vain. But it meant we had betted on the right horse, even though we would have preferred the vote to go a different way. There was a massive interest in receiving up-to-date information from this point onwards, as you can imagine. Our swift action received a great deal of positive feedback, especially in the social media. The nicest comment was to the effect that here’s a region that seems better prepared than the rest of England. We allowed ourselves a wry smile on reading that.
Hubertus Väth: Alongside the website, there was also a Twitter and a LinkedIn campaign with a simple, clear-cut message: welcome. As early as 6.20 in the morning, the media were already on the phone and wanted to know whether, and in what way, Frankfurt was prepared. Since then, there have been around 500 inquiries from journalists from over 40 countries. Even now, no week goes by without two to three inquiries coming in.
What are the central messages? What do Frankfurt and the region have to offer?
Wolf-Dieter Adlhoch: There are undoubtedly a lot of hard facts that speak in favour of the Rhine-Main region. Already today we are one of the most important financial centres worldwide. All the major German banks and over 150 foreign banks are present in and around Frankfurt. The most important regulatory authorities, and first and foremost the ECB, are resident here. Another merit is that the German economy is strong and robust, and – more important than ever in times like these – we enjoy a high degree of political stability. The taxes in Germany are not as high as sometimes assumed; 30 percent on average for companies, that makes us competitive. Our labour law is flexible, fair and above all efficient. As far as infrastructure is concerned, our Frankfurt Airport makes us unbeatable …
Menges: I always like to point out that it’s as close as London’s City Airport and as efficient as Heathrow.
Adlhoch: It’s important to us, however, that we don’t just beat our own drum, but that we present objective arguments.
Väth: Three messages have been clearly heard: Europe still needs the international standing of the financial centre of London, which is why we don’t want to harm London as a financial location. We want to build bridges and not tear them down. And we want to work together effectively in future as well.
Menges: Yes, that’s true: we aren’t conducting any superficial advertising campaign, as other financial centres are indeed doing. We are talking with decision-makers in the companies. And many, very concrete questions have emerged that we didn’t at first have in such clear focus. One example: international schools. You can imagine that’s an important issue for employees who are to come to Frankfurt in future with their families. So we brought all the international schools in the region – more than 30 altogether in and around Frankfurt – together around a table and discussed with them whether they are ready in their structure or in their capacity planning to accommodate a large influx of new pupils. The answer is yes. The diversity of schooling options available is also impressive. Armed with such information, we then go back to our discussion partners and can usually answer their questions in all the necessary detail.
Waldschmidt: Available office space is also a topic that comes up again and again in discussions. That’s why we have surveyed the availability and quality of sites together with the local real estate brokers. Specifically: we have 750,000 square metres of vacant office space at the necessary quality level in the preferred inner-city area. Moreover, project development plans are showing a further increase in these A-grade premises. Consequently, we can take up all the people that serious forecasts suggest for the first wave of immigration caused by the Brexit. When we talk about such changes, things don’t happen overnight. Instead, we assume that three waves will take place, each with different regional effects. The first wave will directly impact the financial centre, and therefore Frankfurt and its immediate surroundings, at the very core. The second wave will involve the relocation of European headquarters, i.e. distribution and back office as well. The radius of impact will expand to take in the belt around Frankfurt. It’s only during the third wave that industry will be affected, and that’s where the whole of Hesse is of interest.
After a year, what are the most significant findings and what should be the focus of attention in future?
Väth: Although we have pole position, the race isn’t over yet. It’s too early to take a breather. Exogenous factors, such as a possible US tax reform, can still change crucial parameters to our disadvantage. We must also point out that the competitors are doing a good job and are achieving some success – for instance in the domain of insurance companies and asset managers. The question of the future of euro clearing will certainly be of great importance – and area where exciting days and weeks lie ahead of us. Here, too, we’ve already done a lot of educational work. But, having said all that, it’s also time to say thank you. Whether BaFin or the Bundesbank, the state government or national government – outstanding work is has been and is being carried out when it matters, and this doesn’t go unnoticed. It has also been remarkable just how many of our members have unselfishly contacted us and asked whether they can do anything for us. Needless to say, we didn’t say no and were able to get a number of things moving. Also noticeable was how actively new members approached us and said that they now understood why we are important and why it makes good sense to participate.
Adlhoch: We take the feedback we receive from the many individual discussions we hold as representatives of state government, of Hessen Agentur, Frankfurt Rhein Main and Frankfurt Main Finance very seriously. What is well received is the confidential dialogue, and that’s why our focus will remain in this area in future. What we will do more intensively is to organise a direct exchange with experts. This region is home not only to the banks and regulators, but also to all those lawyers and consulting companies that are so necessary for the financial industry. We clarify detailed questions about labour law, tax issues and regulatory aspects by mediating contacts and networking experts. One thing we won’t be doing is to promote the location with the help of short-sighted gifts – i.e. allowances, benefits or privileges. We are firmly convinced that as a region we have what we need to make our case effectively to companies and to help them make the right decision in their strategic location. Last but not least, this also applies to the quality of life. We’ve not spoken a lot about that today, but everyone familiar with the Rhine-Main region knows all too well that the spectrum of leisure and cultural activities on offer is really quite impressive.