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Helaba Financial Centre Study: Brexit Banks are packing their Bags

Brexit is looming, and many banks are preparing to relocate their business activities from London to other financial centres. Frankfurt is the favourite in this regard and the list of newcomers to the German banking centre is getting longer and longer. “Brexit banks are gradually packing their bags and many of them will be heading for the Rhine-Main region in the future. To date, 25 Brexit banks have opted for the financial centre of Frankfurt, including many well-known institutions. Paris comes some way behind, followed by Luxembourg, Dublin and Amsterdam. This is the result of our current Brexit Map,” explained Dr. Gertrud Traud, Chief Economist and Head of Research at the presentation of the study in Frankfurt.

Some large corporations have designated Frankfurt as their most important EU hub in the future and, in so doing, have made a fundamental strategic decision in favour of the city, which will also be reflected in corresponding staffing levels. On the one hand, some jobs will be transferred to Frankfurt, which will be accompanied by the employees concerned either moving completely or commuting between the two financial centres. On the other hand, a certain number of new employees will be hired here or Germans who have worked with banks abroad will be recruited for the new jobs in Frankfurt. Since the beginning of the year, more and more Brexit banks have been making firm plans to relocate their activities. Additional institutions are still in talks with the local supervisory authorities. All in all, an accumulation of Brexit banks can be observed in Frankfurt that is unparalleled in Europe.

“In principle, our ranking of Europe’s major financial centres continues to apply: London before Frankfurt before Paris”, explains Helaba’s financial centre expert, Ulrike Bischoff. The only aspect that has meanwhile narrowed is the gap between the relative attractiveness of these locations. Frankfurt has been able to improve its competitive position to a greater extent than Paris.

In view of the sometimes very assertive marketing campaigns of other locations, it is vital that the German financial centre presents itself in a self-confident, concerted manner. Since the referendum, for example, the Hessian state government has accompanied the Brexit process with a variety of activities. There is also a network made up of the various players in the region. In addition, Frankfurt is increasingly receiving verbal backing from the federal government. Now, in view of the short time remaining until Brexit, it is important, for instance, to rapidly implement the planned easing of rules on protection against dismissal for top bankers.

The Frankfurt office market is in good shape shortly before the conclusion of the Brexit negotiations. Vacancy rates have fallen significantly, and rents are approaching their previous highs, although they are still well below the level of competing financial centres. Additional demand by Brexit newcomers and an increase in jobs in other sectors should not lead to bottlenecks thanks to a range of project developments. In contrast, the situation on the housing market remains under pressure despite higher construction activity. The shortage of housing can therefore only be overcome in the long term in collaboration with the surrounding area.

Frankfurt’s Brexit banks come from ten counties; most already have a branch office in Frankfurt or are represented via subsidiaries. In addition, many banks would like to establish a presence in Frankfurt for the first time. Together, Brexit banks of foreign origin in Frankfurt had an estimated 2,500 employees here at the end of 2017. In the scope of their Brexit-related adjustments, they are expected to almost double this number by the end of 2020.

Dr. Traud points out that Helaba has adhered to its Brexit forecast ever since the referendum: “At least 8,000 financial sector jobs will be created over the next few years”. Until the end of 2020, the Brexit effect should have a clearly positive impact on Frankfurt’s banking employment and, ultimately, more than offset on-going consolidation processes in the German banking industry. This suggests a total of 65,000 bank employees in Frankfurt, representing growth of around 3 % or an increase of almost 1,800 bankers.

You can find the complete study as a download here [in German].

Financial Centre Focus: “Brexit – Let’s go Frankfurt”

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.

On the Continent Financial Centre Frankfurt Pulls Ahead

Frankfurt has taken the lead amongst the financial centres in continental Europe. In their 10-year anniversary study, Financial Centre of Frankfurt – Making Further Headway, Helaba economists found Frankfurt to be ahead of other European financial centres. Frankfurt especially leads in terms of institutions like the European Central Bank, outstanding IT-infrastructure, comparably low rent and cost of living and the excellent transportation network.

The Financial Centre Frankfurt scored particularly well in two core areas. First, the city has made substantial progress in terms of financial research and teaching, even gaining in international stature. The combination of Frankfurt’s Goethe University and Frankfurt School of Finance & Management offers a top-quality range of teaching and research opportunities. Next, concerning trends in the financial sector, digitalisation is the dominating theme. Technological change in the finance industry is being primarily by FinTechs and large internet corporations. Efforts in the continued expansion of Frankfurt and the surrounding region as a German and European FinTech hub have not gone unnoticed. Helaba’s Chief Economist and Head of Research, Dr. Gertrud Traud explains, “For Frankfurt to maintain and develop its position, expanding the city’s status as the German and Continental European fintech hub as well as further strengthening its intellectual infrastructure in respect of a financial centre’s capacity for innovation will be of crucial importance.” One significant achievement in this area will be the forthcoming FinTech hub, slated to open in September 2016.

In their current assessment of the financial centres of Frankfurt, Paris and London, Helaba’s economists applied five core criteria, which they consider indispensable for an international financial centre to position itself successfully in the long term. These are: banks, stock exchanges, finance-related teaching and research, trends in the financial sector as well as location-specific qualities.

Download the complete study.