The latest financial centre study by Helaba’s Research unit, which was published today, shows that the German financial centre is in pole position when it comes to competing for businesses and workers looking to relocate from London. A number of banks have already announced that they will relocate jobs from the river Thames to the river Main, which will have an impact on employment figures: “We anticipate that at least half of all financial sector jobs that are leaving London will be relocated to Frankfurt. Over a period of many years, this would equate to a minimum of 8,000 employees. Therefore, by 2019 we see employment in Frankfurt’s financial sector rising by 4 percent to around 65,000 (end of 2016: 62,400). This is despite a simultaneous consolidation process in the German banking industry that is set to continue”, explains Dr. Gertrud Traud, Helaba’s Chief Economist and Head of Research, at the presentation of the study in Frankfurt.
A novelty of Helaba’s long-running financial centre research in this study is its own regional employment aggregate – financial sector employment within “BIG FFM”, an area that was created by transposing Greater London onto the area around Frankfurt. The following picture emerges from this comparison: At the end of last year, around 118,000 people subject to social security contributions were employed in the sector of financial and insurance services, which compares to approximately 360,000 in Greater London. Employment density (in relation to the population), however, is at the same level of just over 4 percent in both conurbations.
The role of the German financial centre as the favourite in the Brexit-related restructuring process is no coincidence: Frankfurt is the leading financial centre in Continental Europe. In terms of relocating jobs from the river Thames to the river Main, the following locational qualities that Frankfurt possesses are particularly significant: the stability and strength of the German economy, the headquarters of the ECB in its dual function as central bank and supervisory institution, the role of the Rhine-Main area as a transport hub with good infrastructure, relatively affordable rates for leasing office space as well as a high standard of living that also offers a varied range of recreational activities in the city and its green environs.
“Since we created our financial centre ranking in 2016, Frankfurt’s relative attractiveness has risen even further”, explains Helaba’s financial centre expert, Ulrike Bischoff. In contrast, it is already undeniable that the City of London has been weakened by Brexit. The continuing high level of uncertainty over future arrangements in the United Kingdom means that it is losing favour among foreign financial centre participants. On top of that, the collapse of the attempted merger between Deutsche Börse and the London Stock Exchange is positive for Frankfurt, since the strong Frankfurt exchange is now able to go its own way. Furthermore, the German financial centre could become even stronger as the European centre for supervision if the EU-wide banking supervisory authority EBA is relocated to Frankfurt.
The relocation of jobs to Frankfurt is shifting the focus onto the regional property market and city’s educational infrastructure, in particular. “In view of a still ample vacancy rate and a number of construction projects underway, satisfying additional demand on the office market should be possible without any difficulty”, expects Helaba’s real estate analyst Dr. Stefan Mitropoulos. On the residential market, though, there is no appreciable vacancy rate. However, the considerable rise in new construction activity, projects planned for the next few years as well as the abundant land reserves available in the surrounding area suggest that there will not be any significant tightening on Frankfurt’s housing market as a result of Brexit. Apart from the real estate market, the range of educational facilities is a key locational criterion. The Frankfurt financial centre region already offers a broad array of international educational establishments that has visibly grown over the last few years. In view of strong demand for school places even beyond the additional demand created by Brexit, there will need to be a further expansion in the infrastructure for children of all ages, including all types of schools.
Dr. Gertrud Traud draws a positive conclusion from the study: “Despite the challenges posed by the impending influx of employees from the river Thames to the river Main, Brexit represents a unique opportunity to improve Frankfurt’s position even further in the competition between international financial centres.”