People in London don’t exactly have the most flattering image of Frankfurt. That’s something even Tarek Al-Wazir has to admit.
The economy minister of Hesse, the central German state where Frankfurt is located, has been on a two-day mission to London this week. He’s leading a 15-member delegation hoping to set aside some of the stereotypes and convince bankers on the island of the advantages of moving to Germany’s financial center.
It’s a tough sell. Londoners typically believe that the sidewalks of Frankfurt are rolled up at night, and that the city has no quality of life and little to offer.
“And yet we have the only English-language theater on the continent,” he said proudly.
Mr. al-Wazir’s visit is one of a series of promotional tours that have been triggered by Brexit – Britain’s June referendum decision to leave the European Union. The economy minister is treading lightly however, rather than rubbing it in bankers’ noses.
In fact, he tries not to mention Brexit during his meetings and is desperate to avoid the impression that he’s on a hunt for talent.
“This is not a bank robbery,” he said, but rather an effort to gather information about what London bankers might want and need from the German financial capital.
In reality though, the mission is clear: The referendum outcome has triggered a scramble between European financial centers like Frankfurt, Paris, Dublin, Luxembourg and even Amsterdam, all of which are courting those London financial managers who could be forced to move as a result of Britain’s withdrawal from the European Union.
A number of banks have already said they are considering moving at least some of their staff abroad, though none have followed through yet. HSBC has said it could move 1,000 investment bankers to Paris. JP Morgan is considering moving as many as 4,000, though it hasn’t said to where. Barclays has mentioned Dublin and Luxembourg as possible locations without giving figures. Deutsche Börse and the London Stock Exchange, which are in merger talks, are debating whether their joint headquarters might have to be set up in Amsterdam or Luxembourg.
“The Frankfurt population is about as big as the number of people working in the financial sector in London – or maybe not even that big.”
European and even American banks, which until now have been able to set up shop in London and do business in other E.U. countries with a license from British financial regulators, could lose this right once Britain is outside the 28-nation bloc. The European Central Bank is also mulling forcing certain financial transactions, like euro currency clearing, to be done only out of euro-zone countries, something Britain has been able to block as an E.U. member.
In the race among the continent’s financial cities, Frankfurt arguably has some advantages from a jobs standpoint. It’s already the home of the European Central Bank, which set up shop there in the late 1990s, and the German Bundesbank. That makes it attractive to financial firms and means that most already have a base in the city.
“This is an opportunity for Frankfurt to become the E.U.’s leading financial center,” said Michael Voigtländer, who issued a study Thursday by the Cologne Institute for Economic Research that rated the German city as the top beneficiary from Britain’s decision.
Mr. al-Wazir also noted during his visit that some groups are already in the process of moving business activities, and notes that Frankfurt is a likely choice.
But that doesn’t necessarily mean bankers actually want to move there. The prospect of being relocated to Frankfurt appears to be everything but tempting for London bankers.
“My family would not play along at any price,” said one banker, who works for a U.S. financial institution. He complained that Frankfurt simply lacks the international schools for his children and shopping opportunities for his wife.
To answer the critics, Mr. al-Wazir does have some surprising statistics to fall back on. Despite its rather sleepy reputation, Frankfurt has regularly been ranked in the top 10 cities in the world in terms of quality of life. He could also point to a much lower cost of living: The average monthly rent for an 85 square meter apartment in the city is below €1,200 ($1,337), about half the average in London. The Cologne institute study also rated other major pluses: Frankfurt’s airport is one of the continent’s largest hubs and less than 30 minutes from the city.
It’s also one of the only cities in Germany that has a bunch of skyscrapers. Germans have therefore dubbed it “Mainhattan,” as it also sits on the Main river.
But let’s be honest, Frankfurt is no New York. And while Paris is similar to London in size and Dublin shares a common language, Frankfurt still seems too much of a stretch for many.
“Another problem is that they speak German there. You don’t get very far with English,” said another banker, who works for a competing U.S. bank.
He also finds fault with the city’s size. “The population is about as big as the number of people working in the financial sector in London – or maybe not even that big,” he added, saying that he couldn’t imagine making the change.
For the record, he’s actually not that far off, though it depends how you measure it. Frankfurt’s population is about 700,000, though the broader Rhine-Main region as it’s known has a population of more than 2 million. London’s financial sector employs anywhere from 350,000 to 800,00, depending on whom you factor in.
This presents a major problem for Frankfurt that goes beyond the optics. Some experts predict as many as 80,000 London bankers may be relocated. If even a fraction of those move to Frankfurt, its housing market could be put under serious strain. Here too, though, the data suggests Frankfurt has an edge over some of the other capitals: The Cologne institute study noted that about 12 percent of office space in Frankfurt is vacant, compared to 8.4 percent in Dublin and 6.8 percent across Paris.
Statements like those from the U.S. bankers underscore the challenge Mr. al-Wazir faces. On his visit, the economy minister said he was under no illusions: “I’m here to listen to the expectations Londoners have.”
The bankers also have some more serious concerns. Mr. al-Wazir said some suggested changing employment laws governing severance for when a worker is let go. The economy minister said he would consider changes – the rules are in place to protect dependent employees and not necesarily investment bankers, he says – but whether he can really force a change and how quickly is unclear.
Other stereotypes Mr. al-Wazir said he was able to clear up. He rejected the notion of some bankers, for example, that employers can’t offer short-term contracts in Germany, or that the country’s employment laws are completely unflexible.
Still, he doesn’t expect a major change overnight. Mr. al-Wazir knows that 10,000 bankers will not be moving to Frankfurt tomorrow, as some had hoped.
“London will remain a global financial center,” the politician said, “but we want to build a bridge for those seeking alternative locations for their E.U. offices.”
Many of the bankers on hand are likely to agree: “We would prefer not to have to move at all,” said one.
Katharina Slodczyk is a financial correspondent for Handelsblatt based in London. Christopher Cermak is an editor for Handelsblatt Global Edition in Berlin and has also lived in Frankfurt. To contact the authors: email@example.com and firstname.lastname@example.org