The ball’s rolling again. After the coronavirus has kept players off the pitch for more than two months, the Bundesliga’s reopening a few matchdays ago sparked controversy and emotionally charged discourse. Videos quickly spread showing players disregarding all rules for “social distancing” and minted once revered stars as negative role models.
The Financial Centre Frankfurt Rhine-Main has plenty to offer, including an excellent start-up ecosystem. As part of the dynamic and international Rhine-Main region, the City of Eschborn is an ideal breeding ground for FinTechs and start-ups, attracting a growing number of companies. In our interview, Dong-Mi Park-Shin, Head of Economic Development of the City of Eschborn, explains why so many innovative companies and start-ups pick Eschborn as their preferred business location.
Eschborn is currently experiencing an enormous boost as a top location for businesses. Many innovative companies take up residence in the city, expanding the variety of industries based in Eschborn. What advantages is that trend creating for the City of Eschborn and the Financial Centre Frankfurt Rhine-Main?
The strengthening of Eschborn economic capacity is a major benefit. The increasing number of successful and innovative companies – which create and make use of synergies between companies and industries – allows the city to be positioned even more broadly in the future. By doing so, Eschborn can guard itself against industry-specific risks such as a financial crisis.
Due to the latest newcomers to the business scene and consequentially growing opportunities for cooperation and networking, the existing corporate landscape becomes increasingly attractive. Moreover, the fact that Eschborn is a key business location for well-known and high-profile companies – especially from the Pharma and Life Science sector – makes the city even more appealing.
Intensive cooperation between companies and surrounding universities – such as knowledge-sharing and financial support of research and development projects – creates further opportunities for all stakeholders involved. Besides fostering innovation, this also puts companies in a leading position in the “war for talents”: highly qualified talents can be effectively tied to the company and the region at an early career stage.
How are the City of Eschborn and the wider region benefiting from that?
The city generates a high trade taxes income, which is not only of benefit to the people living and working in Eschborn but also to the Financial Centre Frankfurt Rhine-Main. Due to municipal allocations and compensation, revenue generated by Eschborn is distributed and reinvested in various infrastructure measures. In addition to expanding schools, kindergartens, hospitals, and ambulances, the city supports cultural institutions such as English Theatre, the Städel and Dialogue Museum, the Opel Zoo as well as the preservation of the Eschborn-Frankfurt cycle race.
All these aspects contribute to a high quality of life in Eschborn and the Financial Centre Frankfurt Rhine-Main, which increases the attractiveness of the entire region and is a competitive advantage in the global competition – especially with regards to various Brexit scenarios.
Many start-ups opt for Eschborn as their business location. What are the decisive factors attracting up-and-coming companies?
Young entrepreneurs – at least in my experience – think, live and work nationally or globally. As part of the dynamic, international and successful Frankfurt Rhine-Main region, Eschborn has all the advantages the region has to offer.
What does this mean precisely?
Great mentors, networks, financially strong companies or venture capitalists (VC) with the necessary know-how are fundamental factors to the success of young companies – they are able to assess, evaluate and support start-up ideas. As an established financial hub, the Financial Centre Frankfurt Rhine-Main provides start-ups with a large number of committed business angels and VCs that have international networks.
In addition, many sponsors and partners such as the TechQuartier, Ernst & Young, Deutsche Börse, Deutsche Bank and GFT Technologies SE are based in Eschborn. This proximity allows for getting in touch with local companies much faster.
How does the City of Eschborn support young companies? How can start-ups and established companies foster mutual knowledge-transfer?
In cooperation with the RKW Kompetenzzentrum, the city of Eschborn advises start-ups free of charge. Furthermore, the city enables participation in various networking events such as Startup meets Mittelstand, Startup Safari, the Founder Summit, the Fintech Forum, and the EY Academy. Moreover, young entrepreneurs and companies have access to contacts and established networks of Eschborn’s Economic Development Agency. We are committed to the start-up economy of the Frankfurt Rhine-Main region and hence, are becoming more and more active. Promoting the cities start-ups in the local magazine “Standortmagazin” draws the regional founder’s attention to the business location Eschborn.
How will the business location Eschborn look like in the coming years?
The integrative urban development plan “Eschborn 2030+” is currently being worked on. It contains a management plan for the future of the city and the business location Eschborn. Thus, it is a prerequisite and framework laying out the conditions for companies and start-ups. Eschborn’s Economic Development Agency actively engages with political decision-making bodies in order to bring attention to the interests of the companies while taking the global megatrends into account. Only if these interests are taken into consideration, companies and the closely associated city and region can continue to develop in a positive direction.
The new Financial Centre Report, Building Bridges – Frankfurt and Europe after Brexit, from Frankfurt Main Finance has just been released. Designed as a magazine, the Main Metropolis is presented from varying perspectives and demonstrates the city’s strengths and the distinct characteristics that set it apart. The first section of the report is devoted to the many facets of the Financial Centre Frankfurt. The second part of the report, Insights, analyzes economic issues and takes a critical look at the opportunities for the Financial Centre following Brexit.
In the forward from Hessian Minister for Economic Affairs, Tarek Al-Wazir, the minister recalls the rise of Frankfurt as the most important Financial Centre in Continental Europe. He points to the multitude of challenges the financial industry faces today. Reflecting on the demands on the industry to re-invent and re-establish itself through digitization. Helping to tackle these challenges is the thriving FinTech scene in the Rhine-Main region.
Another current challenge is coping with the reorientation of the European financial sector following and finding future oriented solutions for this. The title of the Financial Centre Report, Building Bridges, is born from this challenge. The report explains how Frankfurt and the Rhine-Main region are helping to future-proof the European Financial Sector and continue ensuring it can efficiently support the real economy.
The publication from Frankfurt Main Finance casts a spotlight on the Financial Centre Frankfurt and introduces insights that work together to paint an impressive and coherent picture. After the lighter, more personal look at the Main Metropolis in the first section, the following half delves into a fact-based analysis of the Financial Centre Frankfurt and the region. Readers will appreciate the careful exploration of the day’s pressing topics: What does Brexit mean for Frankfurt? The current and future relationship between the real economy and banks. What is the state of long-term financing and how will the German economy be affected by Brexit?
Financial institutions limit job cuts and increase earnings growth – Service providers report slower growth in revenues, earnings and investments
The CFS Index, which measures the business climate of the German financial sector on a quarterly basis, falls by just 0.7 points to 113.6 points. The resulting persistently high level is based on contrasting tendencies. The financial institutions report unexpectedly high earnings growth and make fewer job cuts. The service providers, on the other hand, report a significant decline in revenue and earnings growth, though these levels still remain high. The investment volume of both groups remains positive, though it is not able to maintain previous peak levels.
“The stabilized economic development of the financial institutions is particularly expressed by a gradual rise in earnings expectations, coupled with a strong increase in their earnings generated in the first quarter. This is good news, as it can create the right conditions for urgently needed capital growth among the banks and thus improve financial stability,” Professor Jan Pieter Krahnen, Director of the Center for Financial Studies, interprets the results.
Rating of the future international importance of the Financial Centre Germany reaches second-highest level of all time
Having already been rated extremely positively since the Brexit vote, in the second quarter of 2017 the future international importance of the Financial Centre Germany almost reaches its historic high of 136.8 points from last year. The corresponding value rises by 4.0 points to 135 points.
Dr. Lutz Raettig, President of Frankfurt Main Finance e.V. emphasizes: “The survey clearly shows that the growing trend is intact: the financial sector sees an increasing importance of the Financial Centre Frankfurt. This is a satisfying result and the outcome of increased cooperation between all relevant actors in the financial centre.”
Service providers record significant decline in revenue growth, yet maintain a solid, high level
Growth in revenues/business volume in the financial industry declines slightly, but remains at a solid, high level. Among the financial institutions this sub-index rises by just 0.9 points to 113.9 points. The service providers record a significant decline of 4.0 points, yet remain at a very good level of 126.6 points. Both groups anticipate a further decline in growth in the current quarter.
Unexpectedly positive earnings performance among financial institutions – By contrast, service providers report a considerable decline
The surveyed financial institutions are able to significantly boost their earnings following the weak performance in the previous quarters. The corresponding sub-index rises unexpectedly by 8.0 points to 112.5 points. A year ago the sub-index was as low as 97.9 points. The service providers, on the other hand, report a decline in earnings growth of 5.5 points, though the sub-index remains at a high level of 117.9 points. Both groups, particularly the financial institutions, anticipate a decline in the current quarter.
Financial institutions clearly curtail job cuts
The trend since the start of the year among financial institutions to limit job cuts remains intact. The corresponding employee numbers sub-index shows a significant rise of 7.2 points to 97.6 points, though it still remains under the neutral threshold of 100 points. As for the current quarter, the financial institutions expect job cuts to rise slightly again. The service providers, on the other hand, continue to hire employees at almost the same rate. The corresponding sub-index falls by just 0.1 points to 113.6 points. The service providers are more optimistic regarding the current quarter.
Investment volume remains very positive, but cannot maintain previous highs
Despite a decline in growth, the investment volume in product and process innovations among both groups remains at a strong level. The corresponding sub-index for the financial institutions falls by 2.6 points to 113.5 points. The service providers report a more significant decline of 6.1 points to 111.8 points. Both groups anticipate further declines in the current quarter.
About the Center for Financial Studies
The Center for Financial Studies (CFS) conducts independent and internationally-oriented research in important areas of Financial and Monetary Economics, ranging from Monetary Policy and Financial Stability, Household Finance and Retail Banking to Corporate Finance and Financial Markets. CFS is also a contributor to policy debates and policy analyses, building upon relevant findings in its research areas. In providing a platform for research and policy advice, CFS relies on its international network among academics, the financial industry and central banks in Europe and beyond.
About the CFS Index
The CFS Index is compiled from a comprehensive quarterly survey among 400 decision makers in the German financial sector (return about 50% on average). The survey contains four questions about the participant’s view on different business parameters (business volume, earnings, employment level and investment volume in product and process innovations). The answers to the questions may be given as “positive”, “neutral”, or “negative” and a response is requested for the previous and the current quarter. Due to construction, the maximum index value is 150, the minimum index value is 50; a value of 100 signalizes a neutral business sentiment. The survey-panel consists of enterprises and institutions of the financial industry and selected companies that profit from the financial sector.
Financial Centre Frankfurt the preferred destination for Brexit-induced job relocation
In a comparison of European financial centres, Frankfurt clearly ranks in second place behind London. With numerous qualities in its favour, the German banking centre is an attractive location for domestic and international players in the financial sector and has the potential of becoming the preferred destination for Brexit-related job relocations. The following assets that Frankfurt possesses are of particular benefit: The stability and strength of the German economy, the headquarters of the ECB in its dual function, a transportation hub with a good level of infrastructure, relatively low office rents as well as a high quality of life. This is the conclusion that Helaba’s economists arrived at in their Financial Centre Study “Brexit – Let’s go Frankfurt”. But it has serious competition in the shape of Paris, Dublin, Luxemburg or even Amsterdam.
Dr. Gertrud Traud, Helaba’s Chief Economist and Head of Research, stresses: “If Frankfurt really is to become the principal winner of Brexit, it will require a concerted effort on regional, national and European levels as well as a more self-confident approach.”
Forecast for banking sector employment 2018: Stable at around 62,000 jobs
In addition, a further improvement in the conditions offered by the city is essential to ensure its success. In view of Frankfurt’s excellent position in the framework of European financial centres, demonstrated by various studies, Helaba’s economists believe that it has good chances of picking up at least half the jobs in the financial sector that will be shifted from London to Frankfurt in a restructuring process lasting many years. Thus, Frankfurt now faces the task of putting the necessary prerequisites in place, e.g. in the housing market. Based on very cautious assumptions, a total of at least 8,000 employees would come to Frankfurt over a multi-year period. Since companies cannot wait for the outcome of negotiations, more than 2,000 jobs are expected to be relocated by as early as the end of 2018 already.
“This Brexit-induced effect on the labour market will act as a counterbalance to consolidation in local banks”, says the author of the study, Ulrike Bischoff. Both effects should, more or less, cancel each other out within the forecasting window. By the end of 2018, the study anticipates a total of just over 62,000 bank employees in the German financial centre.
The complete Helaba study is available for download here.
The issue of cyber security is of central importance. Germany’s financial industry is in firm agreement on this point, attributing it a significance of high (20%) to very high (75%). This is shown by a current survey of financial institutions and service providers in the Financial Centre Germany conducted by the Center for Financial Studies. However, the industry is also largely in agreement (78%) that the issue is not being sufficiently addressed at the moment.
Most of the financial industry only expecting some measure of support from FinTechs
Only 8% of the survey participants expect significant support from FinTechs in the area of cyber security. Half of them (51%) believe their company will receive at least some measure of support. On the other hand, 29% are anticipating little support from FinTechs, and 7% none at all “The issue of cyber security is a key topic for the future, and in fact it is tailor made for young technology companies. I therefore expect we will soon see more start-ups in this area,” Professor Volker Brühl, Managing Director of the Center for Financial Studies, interprets the results.
Cyber security can become a competitive factor in the future – Establishing European data centres is seen as important to crucial
The large majority of the financial institutions (86%) is in agreement that the issue of data security can become a competitive factor for financial service providers. Only 12% do not believe this is a relevant point. Since a large amount of data from European users is stored by social networks in the US, the necessity of providing data centres for critical data in Europe is under discussion. The majority of the financial industry (59%) believes it is important to establish such data centres, while 26% regard this as crucial. On the other hand, 12% see little relevance in where data centres are located.
“The study demonstrates how important a world-class data infrastructure is for today’s financial sector. The Financial Centre Frankfurt sets the bar pretty high with dozens of data centres and the DE-CIX internet exchange. More than half of the German data centres are located in Frankfurt and the surrounding region. Our status as the Data Capital of Germany is irrefutable and makes us an even more attractive location for FinTechs,” comments Hubertus Väth, Managing Director of Frankfurt Main Finance e.V.
Bitcoins not expected to gain in importance as a payment method in light of data security concerns
Bitcoins are supposed to be particularly suited to preventing hacker attacks in payment transactions. However, the majority of the financial industry (73%) does not expect bitcoins to gain in importance as a payment method in light of such concerns.
Significant job cuts at financial institutions – Significant job growth at service providers
The CFS Index, which measures the business climate of the German financial sector on a quarterly basis, rises by 0.3 points to 110.6 points in the third quarter of 2016. Though the value remains almost unchanged, it comes as a result of sharply contrasting developments of employee numbers at the financial institutions and the service providers. While the measure of employee numbers at the financial institutions is at a historic low since the Index surveys began in 2007, the service providers are stepping up hiring. Aside from this, the financial industry as a whole is recording growth in revenues and earnings. The financial institutions in particular, after considerable declines in earnings in the first half of the year, now report a clear increase that surpasses expectations. The growth in investment volume declines slightly, but remains at a solid level.
“The figures reflect structural changes in the banking industry’s mode of production, particularly with regard to rising capital intensity and falling employee numbers. Conversely, employee numbers at the external service providers are on the rise, partly due to the trend toward digitalization,” Professor Jan Pieter Krahnen, Director of the Center for Financial Studies, interprets the results.
Financial industry rates the future international importance of the Financial Centre Germany very positively
Following the Brexit vote, the rating of the future international importance of the Financial Centre Germany had reached a historic high of 136.8 points in the second quarter. This value remains at an above-average level of 128.3 points in the third quarter, despite falling by 8.5 points. Dr. Lutz Raettig, President of Frankfurt Main Finance e.V. emphasized, “The results of the study show that there is still great trust in Frankfurt’s capabilities as a leading Financial Centre. Our function as a bridge between London and the EU and our constructive handling of Brexit will strengthen Frankfurt as the most important Financial Centre in the Eurozone.”
Job cuts hit financial institutions more strongly than expected, and further cutbacks in personnel are anticipated
The extent of job cuts at the surveyed financial institutions turned out to be even larger than expected in the last quarter. Previously the number of employees had remained stable at a neutral level. Now the employee numbers sub-index for the financial institutions falls by -13.7 points to a historic low – since the start of the survey in 2007 – of 86.0 points, and the financial institutions are expecting the situation to degrade further still in the current quarter. By contrast, employee numbers at the service providers are developing even more positively than expected. The corresponding sub-index improves significantly on the previous quarter, rising 11.8 points to 116.9 points. The service providers are even more optimistic regarding the fourth quarter.
Revenue growth for the financial institutions
The growth in revenues/business volume among the surveyed financial institutions turns out to be slightly higher in the third quarter of 2016 than was expected in the previous quarter. The corresponding sub-index rises by 2.5 points to 109.6 points. As expected, the service providers also maintain their high level of revenues, slipping just -1.0 points to 119.7 points, and they are anticipating increased revenue growth in the current quarter.
Financial institutions stop decline in earnings – Financial industry takes a positive view of the current quarter
In terms of earnings, both groups report growth in the third quarter. The financial institutions in particular, after considerable declines in earnings in the first half of the year, now report a clear increase that surpasses expectations. The corresponding sub-index for the financial institutions rises by 7.0 points to 103.9 points; the service providers’ sub-index climbs 2.2 points to 115.3 points. Both groups have a positive outlook for the current quarter.
The growth in investment volume in product and process innovations declines slightly, but remains at a solid level. For the financial institutions, this sub-index falls by -2.2 points to 110.1 points, contrary to expectations. The service providers’ sub-index remains stable, slipping just -0.4 points to 112.2 points. As a result, the two groups are still at an almost equal level, with neither anticipating any major change in the current quarter.
The coming EU referendum in the United Kingdom has been a hot topic in all media channels. A Brexit will have many consequences for the UK and Europe. When it comes to how a Brexit could affect the Financial Centre Frankfurt, Hubertus Väth, Managing Director of Frankfurt Main Finance, is a frequently requested and competent commentator.
Below is a selection of interviews over the past two months regarding Brexit.
- ZDF heute on 22.06.2016
- Deutschlandfunk on 22.06.2016
- Newstalk ZB 22.06.2016
- 17.30 Uhr SAT1 on 20.06.2016
- Financial Times on 15.06.2016
- ARD Tagesschau on 14.06.2016
- Badische Zeitung on 12.06.2016
- hessenschau on HR-Fernsehen on 11.06.2016
- ARD Wirtschaftsmagazin plusminus on 01.06.2016 titled „Goodbye Großbritannien? – Wo die Deutschen on Brexit profitieren“
- Frankfurter Neue Presse on 30.05.2016
- BBC News on 09.05.2016
- Südwest Presse on 05.05.2016
- Stuttgarter Nachrichten on 04.05.2016
- Frankfurter Neue Presse on 08.04.2016
- Frankfurter Allgemeine Zeitung on 21.03.2016
Hubertus Väth clearly states, “We do not wish for a Brexit to occur. It would be terrible for Germany, Europe and Great Britain. However, should it come to pass, it would be a clear opportunity for the Financial Centre Frankfurt. We estimate that jobs relocating to Frankfurt could number in the tens of thousands.”
Frankfurt is not only a German Financial Centre, but also a major European hub. The Financial Centre is home to the European Central Bank and is considered the centre of monetary stability in Europe. The exchange platforms and IT systems in Frankfurt are internationally recognized for their reliability and security. Frankfurt is also an important centre for European Financial Supervision, home of the European Insurance and Occupational Pensions Authority (EIOPA) and the European Systemic Risk Board. Frankfurt is well-equipped as a stable Financial Centre to embrace those looking for a new base of operations within the Eurozone. Frankfurt stands ready with a high-capacity real estate market as well as an excellent range of service providers, particularly in the areas of accounting, legal, communications and IT. For example, in Frankfurt you will find the DE-CIX internet exchange hub, over which more than 40% of the European internet traffic flows. Compared to the lasting instability in Great Britain, Frankfurt represents openness, stability, capable infrastructure and favourable conditions.
In the eyes of Germany’s Federal Minister of Finance Dr. Wolfgang Schäuble, the up-coming referendum on EU membership is possibly the biggest political decision facing the citizens of the UK in a generation of more. Minister Schäuble expressed this in his keynote address at the Frankfurt Finance Summit. He advocated for the UK to remain in the EU, but explained that there would not be any further concessions made. If the UK were to decide for a Brexit, the exit phase would begin immediately. He also explained that the government would not campaign for the headquarters of Deutsche Börse to remain in Germany in the case of a merger with the London Stock Exchange. This will also hold in the case of a Brexit.
Watch Dr. Schäuble’s entire address below.
Currently, one of the most discussed topics is the UK referendum regarding a possible exit from the European Union. On the most recent episode of ARD’s business programme Plusminus, the segment “Goodbye Great Britain? – Where the Germans profit from a Brexit” explored the possible effects of a Brexit for the Financial Centre Frankfurt.
“We do not wish for a Brexit to occur. It would be terrible for Germany, Europe and Great Britain. However, should it come to pass, it would be a clear opportunity for the Financial Centre Frankfurt”, explained Hubertus Väth, Managing Director of Frankfurt Main Finance during the broadcast.
The broadcast continued to illuminate certain criteria which already make the Financial Centre Frankfurt an optimal location. Taking in the imposing tower of the European Central Bank headquarters, it is clear that Frankfurt is not just Germany’s most important Financial Centre, but also one of Europe’s. Several other institutions with their headquarters in Frankfurt, like the European Insurance and Occupational Pensions Authority and the European Systemic Risk Board, also lend to the Mainmetropolis’s clout as a Financial Centre. The financial decisions made in Frankfurt resonate across the continent.
In addition to its institutional prominence, Frankfurt’s superior infrastructure offers a competitive advantage not enjoyed by all other cities. Frankfurt boasts dependable, fully integrated exchange trading systems and is the technological leader in payment transactions. Furthermore, Frankfurt is considered the world’s largest data exchange point, with peak rates of 5.1 Terabytes per second. This is essential for practitioners in the financial sector who require lightning fast and reliable connections for data transfers and transactions.
The Main Metropolis offers additional decisive advantages, like the availability of affordable office space, a deep field of service providers, top academic institutions and one of Europe’s best-connected transportation networks. Short and sweet – Frankfurt is ready to roll.