Guess what? Not too many London-based bankers are willing to leave one of the world’s great metropolises, teeming with cultural riches, to move to sleepy little Frankfurt because of Brexit. Whatever the charms the German city has simply can’t compete with those of the British capital.
While it’s not quite time for Plan B, London banks are delaying decisions and scaling back projections for transferring personnel they need to maintain the advantages of offering financial services throughout the European Union once Britain leaves the bloc. The resistance of London bankers to relocation is also exacerbating the competition for those professionals willing to move to Frankfurt or already there.
Even Deutsche Bank is setting its sights lower as it seeks to woo German natives on their London staff back to their homeland. Germany’s largest bank has scaled back its target for transfers to just a few hundred from the 4,000 originally contemplated.
The task is much harder for international banks in London who now need to staff up EU operations in a country that not only poses linguistic and cultural obstacles but also faces shortages in housing and schooling for foreign professionals and their families. “Less than a third of those we’ve spoken to have indicated they are willing to follow their job to Frankfurt,” said one highly placed manager at a big European bank.
The new coalition pact agreed on this week isn’t likely to help. To “make Germany more attractive for financial institutions” in the wake of Brexit, the new government plans to make it be easier to fire high-earning bankers. Anyone earning more than €235,000 would be considered the same as senior executives, who don’t have the same legal protections as other employees. That might be an incentive for the banks, but hardly a sweetener for the employee.
“The market will get tighter.”
Other banks are having the same experience. “There are only two alternatives remaining if we don’t want to motivate the unwilling with a lot of money,” said a top manager at a US bank. “We ask our German colleagues who are working for us in London or elsewhere if they want to go back home. And we get used to the idea we will have to hire more people on site than we originally thought.”
But those people are hard to come by. The banking sector in Frankfurt employs just 60,000 people – a sixth of the number working in that sector in London. So Deutsche Bank will not only have trouble getting some London staff to move back to Frankfurt, but may have difficulty holding on to employees already there. Ditto for Germany’s second-largest bank, Commerzbank.
“The market will get tighter,” said Nicola Sievers from Inner Circle Consultants in Hamburg. The fact that Germany’s big banks as a rule pay less than other big banks only makes them more vulnerable to poaching, she added. “Some German banks presume they will lose people, or have already lost a few staff,” she said.
But the hunt has only just begun. A dozen or so banks have already committed to expanding Frankfurt operations, but so far have held hiring to a minimum. Goldman Sachs, for instance, which is staffing up both in Frankfurt and Paris, so far has only advertised for a handful of lower echelon managers in the regulatory department. Similarly, Morgan Stanley and JP Morgan are seeking middle-level experts in risk management and IT.
Executive search firms like Inner Circle are still waiting for mandates. “We will try to fill the absolute top positions preferably with internal candidates,” said a manager at a US institution. These highly paid top managers will have the flexibility to wait a while before actually moving, saving the banks from having to add these costs to the spiraling expenses of the move.
In general, London banks are trying to delay personnel decisions as long as possible. Some are hoping the whole nightmare will just go away, and somehow Brexit will be reversed, or delayed or modified to the point it doesn’t matter.
The official exit is set for late March 2019, but both sides envisage a transition period extending to the end of 2020 – that is, if they agree on the terms for the exit and its aftermath. “Our plans currently provide that we can wait until the end of the first quarter to see what the discussions between London and Brussels come up with,” said a US bank manager. If nothing concrete emerges by then, he added, “We’ll have to speed up the expansion of our Frankfurt operation.” This bank has already compiled a list of its German staff worldwide.
Meanwhile, Deutsche Bank and Commerzbank are adopting some unusual tactics to keep their staff away from competitors. For instance, they are moving some back office operations out of Frankfurt – to Poland. Commerzbank’s Chief Financial Officer Stephan Engels admitted last year that this was in part to hinder poaching.
Commerzbank also started up new trainee programs to fill the growing gap for IT and compliance personnel. Helaba, too, the large Landesbank based in Frankfurt, has expanded its training program. This wasn’t just because of Brexit, they say, but it will help them weather the poaching.
However, staff at the state-backed Landesbanks may not be the first choice for the London operations moving to Frankfurt. “They don’t fit very well with us given their preference for a nine-to-five day,” said one banker. Given the competition for staff to come, he might have to change his mind on that score.
For highly specialized experts such as those working on structured products, there may be only one solution. “The banks,” suggested one headhunter, “won’t be able to get around the fact that they will have to induce these specialists to move with money after all.”
Katharina Slodczyk and Andreas Kröner are Handelsblatt reporters in Frankfurt. Darrell Delamaide is a Handelsblatt Global editor in Washington, DC. To contact the authors: firstname.lastname@example.org, email@example.com, and firstname.lastname@example.org.