Brexit brings up to 88 thousand new jobs in the Rhine-Main region

WHU study quantifies the Brexit impact on the employment market

New jobs in the banking sector – that’s the expected result of impending relocations from London to Frankfurt. As early as June 24th, 2016, one day after the referendum, Frankfurt Main Finance estimated the potential repercussion of a Brexit decision to be up to 10 thousand new jobs for Frankfurt within the financial sector and its directly related services. Today, some people already regard this figure as too conservative. A job motor can also be expected in other fields, according to the findings of a study by WHU – Otto Beisheim School of Management carried out on behalf of Frankfurt Main Finance. “It will be the multiplier effects on many areas of day-to-day life that will lead to a significant growth in employment above all in the Rhine-Main region,” explains Professor Lutz Johanning, who conducted the study together with Moritz C. Noll from the Chair of Empirical Capital Market Research. In this interview, both academics give us a deeper insight into the underlying calculations.

Prof. Johanning, what exactly is analysed in your study?

Lutz Johanning: We looked at the effects of the relocation of banking jobs in the wake of the Brexit decision on the employment market as a whole – for the City of Frankfurt, the towns and cities in its direct vicinity, and the Rhine-Main region. In the analysis, our focus was on the multiplier effects, i.e. what growth will result for other sectors and industries from an addition to the number of banking jobs. And the study shows that this effect is 2.1 to 8.8 times higher, depending on the area under consideration. Therefore, in the most optimistic case, if we assume ten thousand new bank jobs, up to 88 thousand new jobs can be created during the following four years in the Rhine-Main region.

Prof. Lutz Johanning: “The relocation of jobs doesn’t occur in isolation. People move their lives into a new city – with everything that involves.”

That’s a huge figure. How do you arrive at that result?

Moritz Noll: We extrapolated the existing statistical data on the employment market in Frankfurt and the region into the future with the help of an empirical model, taking the effects of the Brexit into account. To ascertain and arrive at meaningful figures for the purposes of further planning, we placed a high priority on two factors. Firstly, a valid data basis has been very important for us. Our study is therefore based on employment market data from the German Federal Employment Agency (BA) covering the past nine years. Secondly, we looked for statistical models that have already been effectively applied in the scientific community.

Moritz C. Noll: “Even though the Brexit is a unique occurrence, scientifically based models still exist that enable the repercussions for the employment market to be reliably assessed.”

Where did you find an appropriate solution? After all, the Brexit is an unprecedented event.

Noll: The Brexit is indeed unprecedented, but not the fact that jobs are moved to a new location as the result of changed basic conditions. There are, for instance, well-founded scientific analyses for the energy sector in the USA – bear in mind the topic of fracking. The resettlement of jobs to new locations is quite common in this context. The resulting repercussions, not only for the primary sector affected, but also in terms of the overall impact on a region have been frequently examined during the last few years. These models allow specific assumptions to be derived on which we have based our study.

Johanning: The indirect effects can be quantified with this approach. If a job at Bank X is moved from London to Frankfurt, this is not an isolated process. Rather, the person who occupies this position relocates his life into a new city – with everything that involves. He or she usually comes with a family, which means that all the corresponding needs have to be met. This begins with quite simple issues such as residential needs, schooling, training, and the requirements of daily consumption. But it also has wider structural implications – the keywords here are infrastructure, the educational system, the market for houses and flats.

Prof. Lutz Johanning: “The Rhine-Main region in particular will profit from the growth in jobs. Most of the additional jobs outside of the financial industry are more likely to occur in the areas around Frankfurt.”

Why are you so sure that the affected bankers will be transferring their primary place of residence to Frankfurt? After all, London isn’t all that far away.

Johanning: The same discussion took place a number of years ago in connection with the European Central Bank employees. The question then was also whether people will actually be moving to the Rhine-Main region or whether they will just be here to work. Experience shows that they come here to work and to live. That’s why this particular context has provided a best-practice example for many years, and this has served as an orientation for us in the study.

You have differentiated in your analysis – between Frankfurt, its immediate environs, and the region. What does this distinction reveal?

Johanning: Frankfurt will profit directly from the new jobs in the banking sector. That’s not a regional issue. The central office sites will be found in the city centre. Consequently, the effect here on other parts of the economy is also modest, around 2.1- to 3.4-fold. Bank-related services will also benefit during the course of development; but these services are often not located directly in the city, but in the immediate surroundings like Eschborn, Offenbach or other neighbouring cities. In addition, many people are looking for somewhere to live somewhat outside of Frankfurt. That, in turn, will benefit the neighbouring municipalities as well as the entire region. The larger the radius drawn, the more differentiated the effects and the greater the multiplier effect. Optimistically speaking, ten thousand new bank jobs in the city can generate up to 88 thousand new jobs in the Rhine-Main region.

The study mentions two models. What does that mean exactly?

Noll: We’ve made use of two models to assess the impact of the ten thousand new jobs in the financial sector on all the other industries. Model 1 takes a factor into account that dampens the growth effect to a greater degree. Model 2, on the other hand, does not include this factor, and the growth is estimated to be higher overall as a result. It was important for us to present the entire spectrum of possible results in the study.

You know the statistics in detail. In which industry will the effects have the greatest impact?

Johanning: It should be said to start with that Frankfurt is a region with a very high growth rate – even without the Brexit. The highest growth rates over the past few years have been recorded in the sectors of logistics, real estate and business services. These growth industries will be given an additional push through the Brexit effect. What cannot be deduced from our quantitative model, however, is which structural changes within the individual industries will lead to greater or less growth over the next few years.

Noll: In a further step, we examined with the help of our models how the long-term job growth rates differ with and without the Brexit. As a result, we were able to show that the long-term growth path is changed by an initial shock, i.e. the relatively sudden event of additional jobs flowing into the financial industry caused by the Brexit. This means that job expansion throughout the employment market as a whole can be significantly higher in the long term in the Brexit case than in a case without additional Brexit jobs. One can therefore see that the growth effects on the employment market can be markedly higher than the initial effect might lead us to expect. So there’s still room for growth and untapped potential.

Moritz C. Noll: “If we also take the long-term effects into account, even better figures are possible.”

So the upshot is even more growth for an already prospering region. Have you also been able to quantify in the study how local government tax revenues will change as a result?

Johanning: We’ve attempted to estimate this effect as well with the aid of a simple projection, at least for the Frankfurt city area. However, these results should be considered with caution since they are based on the previous results from the employment market forecasts, which inevitably results in additional inaccuracies. We looked at the local government share of the income tax, the value-added tax and the local business tax. In summary, we estimate that the City of Frankfurt will be able to earn between EUR 136.2 and EUR 191.9 million in revenue every year through the three above-mentioned tax forms as a result of the additionally created jobs.

Thank you for the interview.

Winning Frankfurt: Brexit Bankers’ Welfare Effect Beyond Bringing Their Jobs

Picture credits: fritzphilipp photography 

Study quantifies job growth in Frankfurt due to Brexit

What is the total job growth in Frankfurt and its surrounding area as a result of the Brexit? This and other questions were discussed by journalists with representatives of WHU, company Frankfurt Economic Development, and Frankfurt Main Finance. The occasion was the publication of the study Winning Frankfurt: Brexit Bankers Bring More Welfare To Frankfurt Than Just Their Jobs.

13 journalists came together in the premises of Frankfurt Main Finance, where Professor Dr. Lutz Johanning and Moritz C. Noll from the Chair of Empirical Capital Market Research at the WHU – Otto Beisheim School of Management, Oliver Schwebel, Managing Director of Frankfurt Economic Development, and Hubertus Väth, Managing Director of Frankfurt Main Finance, presented the latest study “Winning Frankfurt: Brexit Bankers Bring More Welfare To Frankfurt Than Just Their Jobs” on August 24th.

It was already obvious in advance that the Brexit would lead to a relocation of jobs in the financial sector from London to Frankfurt. Well-founded estimates assumed a figure of around ten thousand jobs over the next four years. But the growth in jobs as a whole generated by the Brexit is much higher, according to the results of the study. The study has focused on the multiplier effects, and therefore on the question what growth will result for other sectors and industries from an increase in the number of Frankfurt banking jobs. The result shows that this effect is 2.1 to 8.8 times higher – depending on the area under consideration. Therefore, in the most optimistic case, if one assumes a figure of ten thousand new bank jobs in Frankfurt, up to 88 thousand new jobs can be created during the following four years in the Rhine-Main region.

Winning Frankfurt: Brexit Bankers’ Welfare Effect Beyond Bringing Their Jobs [Download]

Picture credits: Frankfurt Main Finance

“We are doing everything we can to create additional living space”

The Financial Centre Frankfurt is poised for a sudden upsurge in its population. How can enough living space be created to meet such an influx? Here is an interview with Mike Josef, head of the city planning department.

Experts are anticipating a figure of 6,000 to 10,000 new jobs that will come about alone in the banking sector in the wake of many companies relocating from London to Frankfurt. How is the City of Frankfurt dealing with the concurrent need for more housing space?

Mike Josef: We are boosting residential construction, first of all by allocating areas as new building zones. Whatever happens in detail, Frankfurt am Main is expecting a strong population growth over the next few years. Depending on the projection one believes, the expected figures for the year 2030 are in the direction of over 840,000 inhabitants, but they differ from one another by more than 100,000. This shows the level of uncertainty endemic in such forecasts. Moreover, the estimated number of jobs that could be relocated to Frankfurt is subject to change. For those coming to Frankfurt in the wake of the Brexit decision, we have built up an extensive range of offers in this segment over recent years. Of prime importance now is to provide the broader middle class with affordable living facilities and offer these people a future in Frankfurt. That’s why I’m making a special effort to promote the building of low-cost homes and apartments, a segment where construction has been disproportionately low during the last few years.

A new city district is being planned near Steinbach. In terms of the resulting living space and the time scheduled for the project, is this enough?

Josef: It goes without saying that one element alone is not sufficient to create sufficient living space for what is a growing Frankfurt. We are therefore exploiting all options at our disposal to create additional homes. This includes inner urban development, i.e. the conversion of office buildings or entire land areas, as we are doing in the former Niederrad office district or setting in motion on the Römerhof. Further options being deployed are redensification, where this is compatible for the environs and the environment, and the consolidation or border realignment of existing city districts. Because this is not enough, we also have to expand outwards, i.e. we have to build on previously undeveloped sites.

What other aspects have to be considered in such a project as regards infrastructure?

Josef: It’s important that the infrastructure is complete and ready to use before the first residents move in: roads, squares, parks and local public transport must be available, and this also applies to the social infrastructure. This embraces, for example, day nurseries, schools, youth centres and facilities for senior citizens, along with the necessary cafés, bars and restaurants and local shopping amenities. We must now determine the precise extent of the infrastructure facilities we need in the new district during the course of our further planning.

Thank you for the interview.

Picture credits: City of Frankfurt

Brexit bankers bring more welfare effects to Financial Centre Frankfurt and the region than just their jobs

New jobs in the banking sector – this is the expected result of relocations from London to Frankfurt. Well-founded estimates speak of ten thousand additional jobs within the next four years. The overall increase in job growth associated with Brexit is significantly higher because multiplier effects cause growth in other industries as well, according to the findings of an academic study conducted by WHU – Otto Beisheim School of Management on behalf of Frankfurt Main Finance.

“We investigated the effects of the relocation of banking jobs as a result of Brexit on the entire labour market for the city of Frankfurt, the neighbouring cities and the Rhine-Main area,” says Prof. Dr. Lutz Johanning, one author of the study. “Our study shows that the multiplier effect is between 2.1 and 8.8, depending on the area examined. If we consider adding 10,000 new jobs in the banking industry over the next four years, then, according to our prudent estimate, an additional 21,000 jobs could be created in Frankfurt City. In the optimistic case, this could result in up to an additional 88,000 new jobs in the Rhine-Main region.”

Moritz C. Noll, co-author of the study, says, “With our models, we demonstrate that the long-term growth trajectory is changed by an initial shock, in other words, the additional jobs in the finance sector due to Brexit. Thus, we argue that the growth effects on the labour market can be significantly higher than the initial effects suggest. There’s still room for further gains.”

Hubertus Väth, Managing Director of Frankfurt Main Finance, says, “The job growth will further advance the economic strength of Frankfurt and the region. A real success story for all parties involved. Now, it is important to absorb and shape this growth positively. That is a challenge. However, the additional jobs also bring the funds to invest and master the challenge.”

Based on the assumption that 10,000 financial sector jobs will relocate to Frankfurt due to Brexit, this also results in additional tax revenues for the city of Frankfurt. In the conservative scenario, the net gain from income, value-added and local business taxes is around 136 million euros per year, while the optimistic scenario would yield nearly 192 million euros.

Winning Frankfurt: Brexit Bankers’ Welfare Effect Beyond Bringing Their Jobs

Frankfurt celebrates Museums on the Main

Two million people visit the Museum Embankment Festival every year in the banking city of Frankfurt. The event is now taking place again from August 25th to 27th.

It’s counted among the largest and most spectacular art and culture festivals in Europe: the Museum Embankment Festival (Museumsuferfest) in the heart of Frankfurt. It’s therefore no surprise that around two million people are drawn to the Main every year when the museums on the river’s north and south banks open their doors until well into the night.

In front of the impressive backdrop of the Frankfurt skyline, a rich and varied spectrum of stage presentations, colourful live performances and culinary specialities from all over the world complement the programme of the three-day museum festival, which ends on August 27th at 10 pm with a glorious firework display.

Here you can view the programme for the Museum Embankment Festival 2017 online or download the programme booklet in pdf format.

Picture credits: visitfrankfurt  / Holger Ullmann

“Influx to Frankfurt – chances for the city as business location, financial centre and modern metropolis”

Frankfurt will profit when many bankers move from the Thames to the Main. Here is an interview about the chances and challenges with Dr. Rolf E. Stokburger, Managing Partner, Germany, at the international HR consultancy Boyden and a specialist in the search and placement of executive personnel.

People working in London’s financial sector seem increasingly willing to move to Frankfurt. What are the reasons for this?

Dr. Rolf E. Stokburger: The increasing relevance of the Brexit vote and the resulting decision of a number of banks to switch their location for financial services and products to Frankfurt are causing more and more London bankers to think about moving to Frankfurt. American and Japanese banks, in particular, such as Goldman Sachs, Morgan Stanley, Citi, Nomura, Daichi or the Swiss-based UBS, have already announced their intention to resettle. We can distinguish two groups of bankers at the moment. Firstly, there are those who see relocation as an opportunity for career advancement and therefore want to play a pioneering role as a “first mover”. Secondly, we have a lot of professionals whose move to Frankfurt is planned as a part of the resettlement of their business division – and who simply have no other choice but to “take it or leave it”.

When all these people live and work in Frankfurt in future, what are the opportunities that such an inflow presents? And what are the challenges?

Stokburger: When the first wave of London bankers comes to Frankfurt, our financial centre will grow further and the city will become more important internationally. But the expansion of existing foreign bank representations in Frankfurt and the foundation of new banks under German law will also create new jobs for German bankers, especially in the fields of risk management, compliance and administration. In addition, any enlargement of the Frankfurt financial centre will certainly help attract further players and operators in the market, such as business consultants, auditors, law firms and private equity funds. The banks resident in London at the moment, on the other hand, will inevitably have to draw up appropriate incentive plans for Frankfurt so as to induce and motivate their employees and executives to move to and remain in the Main metropolis. And for its part, the City of Frankfurt will have to face up to the challenge of providing enough living space for homes along with the sufficient international school places and day-care facilities.

How can the Rhine-Main region best prepare for this influx?

Stokburger: The relocation of capacities to Frankfurt announced up to now must be seen within a longer perspective. It can safely be assumed that the establishment and expansion of specific banking houses that has now been publicised will be followed by a number of others – a great opportunity for Frankfurt as a business location and financial centre, but also a great chance for Frankfurt as a major city. With a view to this imminent influx, as well as any further settlements that may come, the city and the region should act together with a more unified voice and with a greater resolve and should offensively advertise the merits of Frankfurt as a top location. Frankfurt, together with the many towns and municipalities in its environs, has a host of advantages over a mega-city like London – and these benefits should be proactively promoted. A glance at the various construction projects currently in progress in the City of Frankfurt already shows that at least the real estate sector is geared up for growth. To make sure that the integration of new bankers into the urban and social life of the city is as smooth and successful as possible, it is now up to the city marketing and development planning agencies to communicate the cultural strengths and advantages of Frankfurt and its vibrant diversity more effectively. This will help brush up, if not revamp the image of a city that is partially perceived as being too provincial.

You can read more about this topic here:

Picture credits: Boyden

Is the EBA coming to Frankfurt?

In the wake of the Brexit vote, the European Banking Authority has to relocate.

The Brexit has been talked about for a long time – now things are starting to move. More and more banks are deciding to transfer their activities from London to Frankfurt. Deutsche Bank and Citigroup are two prominent examples. But major institutions like the European Banking Authority (EBA) are also on the verge of choosing a new location. After all, the EU’s banking regulator has to be based in a member state of the EU.

The application process surrounding the EBA is long underway and it’s also clear since the end of July exactly who has thrown their hat into the ring: eight cities – Frankfurt and Paris, along with Brussels, Dublin, Prague, Luxembourg, Vienna and Warsaw – all want to offer the authority a new home. The reason is simple: the presence of such a significant institution enhances the standing and prestige of the host location enormously.

Eight candidates in the running

Accordingly, the eight candidates are busily committed in their efforts to broadcast their merits with lots of facts about their respective locations, for instance on infrastructure, transport links, working conditions and schools. But to some extent they’re also making concrete promises. Luxembourg and Vienna, for example, are offering rent-free office space.

Frankfurt wants to make a persuasive case with hard facts, and Volker Bouffier, Prime Minister of the State of Hesse, is not alone in his conviction: “Despite our many competitors, we have a good hand.” The government has put together a comprehensive dossier to explain why that’s true. It highlights all the aspects that are important when choosing a location. However, since many of the features that make up the special setting and ambience in and around the Main metropolis are difficult to convey on paper, Frankfurt is also presenting itself with a film that shows what it means to be at home in Frankfurt.

Frankfurt can score in every respect

It’s the combination of the many different elements that’s decisive, Prime Minister Bouffier is also certain. As he points out, Frankfurt can boast a very good infrastructure and a large number of international banks and insurance companies and is thus the most important financial centre in continental Europe. The existing supervisory structure, including the European Central Bank (ECB), the Insurance and Occupational Pensions Authority (EIOPA), the Deutsche Bundesbank, the German Federal Financial Supervisory Authority (BaFin), the European Systemic Risk Board (ESRB) and the Single Supervisory Mechanism (SSM), completes this unique network of relevant players at one place.

That the settlement of the EBA would be a logical next step and would also create synergies is beyond question for Bouffier. German Finance Minister Wolfgang Schäuble also stresses that it’s now important to ensure planning security at an early stage in view of all the risks and uncertainties the European Union will be faced with as part of the Brexit: “This also applies to the question of the future headquarters of the EBA. I am firmly convinced that a key combination of factors make Frankfurt am Main the best option.”

Attractive offer for companies and institutions

Frankfurt’s application has been intensively prepared by numerous experts. One of them is Dr. Rainer Waldschmidt, Managing Director of Hessen Trade & Invest GmbH (HTAI). His familiarity with Frankfurt and the region is second to none, and he knows from many discussions with companies and political decision-makers in London what the burning questions are that arise during any relocation.

Not the loud beating of one’s own drum, but substantial, fact-based persuasion is the best way to support the decision-making process in his experience. “Many companies are looking for a safe haven in the EU following the Brexit decision. We want to make them an attractive offer. We can effectively provide them with a unique network of all the relevant actors,” says Waldschmidt.

Together with many other representatives from the city and state, he is promoting Hesse as an outstanding location in the EU – not least for one of the central authorities like the EBA.
Since August 1st, all applications for future EBA locations have been published on the European Council website. The German government’s application for the Federal Republic of Germany and the location of Frankfurt am Main can be viewed on the website of the Federal Ministry of Finance.

You can read more about this topic here:

 

Frankfurt’s international talent pool reaching new depths

In the wake of the UK Brexit decision, it’s now evident that many financial service providers will be relocating their EU locations from London to Frankfurt. In purely practical terms, this means that many people are facing having to move from the Thames to the Main during the foreseeable future. This impending change is not without impact on the general mood in the sector.

Christopher Schmitz, Partner at Ernst & Young (EY)

“In our discussions with those affected, we sense that relocation first and foremost means uncertainty,” says, for example, Christopher Schmitz, a partner at the international Ernst & Young (EY) consultancy with responsibility for Financial Services. “After all, London was deliberately chosen at the time, and people have also felt at home there in many ways over a number of years. A transfer to other European locations is now on the agenda – and this involves a switch into a different language environment, culture and living situation, and lots of other changes besides.

The multicultural scene is maturing

While EU and UK representatives are busy discussing the rights of millions of EU citizens in the UK and vice versa as part of the Brexit negotiations, companies like EY are registering a steady increase in the number of unsolicited applications from London in the direction of Frankfurt. The reasons for this are manifold.

“In terms of the quality of life, Frankfurt has a standing that is by no means worse than other European metropolitan centres,” Schmitz contends. The Rhine-Main region, with its central location in Germany, can boast an excellent transport infrastructure along with an efficient international airport. The attractive countryside in the immediate surroundings and the city itself with its full spectrum of cultural offers are also impressive arguments. “Frankfurt is already today a melting pot of multicultural influences, enriched by the fast-growing international communities from the IT and banking industries that are resident here,” as Schmitz points out.

“Secondary effects of the influx are likely throughout the region, such as the growth of purchasing power, overnight stays and tax revenues.”

A glance at the portfolio of applicants who want to live and work in Frankfurt reveals a surprising picture. It’s not necessarily just the citizens of European countries who are choosing the Rhine-Main region as a location. Instead, highly qualified candidates from other nationalities are also sending their applications from London.

“With the EU Blue Card, i.e. the EU-wide work permit, Frankfurt promises freedom of travel and work throughout the EU – something that a UK work visa may no longer be able to offer after the Brexit,” as Schmitz explains the current situation. Indeed, according to the Orbis database, the number of Indians with a Blue Card in Frankfurt has already risen by 566 percent between 2013 and 2016, while the average increase in Germany as a whole amounted to a mere 80 percent.

Frankfurt is a favoured destination for Indian specialists

Generally speaking, the city on the Main is a favoured destination for Indian specialists in particular. Also looking at the period between 2013 and 2016, Frankfurt recorded a rise in its Indian population of 4,720 residents or 37 percent. In comparison, the overall influx of other nationalities increased by only 14 percent.

Schmitz sees this trend as offering the chance to profit from talent pools to which the city previously had no or only limited access: “Frankfurt can establish itself as a location for international talent and therefore also become interesting for further employers, for example those from the tech sector,” the expert from EY insists. He sees the financial services sector as the main beneficiary of this development, but he also stresses the secondary effects of the influx, such as the likely growth of purchasing power, overnight stays and tax revenues throughout the region.

“With the EU Blue Card, i.e. the EU-wide work permit, Frankfurt promises freedom of travel and work throughout the EU.”

Nevertheless, despite all its positive effects, so many people moving into the city region is also a challenge. It is vital to work on achieving an effective integration. According to Schmitz, proficiency in the German language will help ensure this in the long term, but the availability of places at international schools for the children of international employees and sufficient living space are also important contributing factors. “What’s more, the politicians and the business community could, for example, also provide a Welcome Package with information on the region or offer concessionary fares for local public transport during the first few months. Equally helpful might be a multilingual care and support service for new arrivals in Frankfurt or the provision of administrative assistance in making applications, such as for the Blue Card,” as Schmitz also suggests.

You can read more about this topic here:

Picture credits: Ernst & Young, AnastasiiaUsoltceva / fotolia.de / Back Lit Business People Traveling

Happy Birthday Deutsche Bundesbank!

The German Central Bank, headquartered in the banking centre Frankfurt am Main, is celebrating its 60th anniversary.

Almost 13 billion German marks (DM) are still in circulation – one of the reasons is because many Germans are still hanging on to the coins or notes from the old currency as a souvenir. The cash can still be exchanged in the branches of the Deutsche Bundesbank, an institution that has watched over the stability of the DM as the monetary watchdog for decades.

With the introduction of the euro as German currency, this responsibility has passed into the hands of the European Central Bank (ECB). But the Bundesbank and its almost 10,000 employees continue to supply banks with fresh cash, sort out counterfeit money, process payment transactions both at home and abroad and supervise the activities of most of the banks in Germany. It also holds and manages the country’s gold reserves.

The Deutsche Bundesbank is celebrating its 60th anniversary this year, and to mark this jubilee it has recorded everything one needs to know about its inception and development in brief yet informative little films. On the Deutsche Bundesbank website, anyone interested can also find key dates, facts and figures about the central bank and has the chance to view a range of historical photos and film footage.

Picture credit: Deutsche Bundesbank