For months after the Brexit referendum, Japanese bankers were invited to visit Frankfurt. They were going to watch a football match and meet one of the star players of the local club: Makoto Hasebe, former captain of the Japanese national team.
Impressed by the clean air, green spaces and family atmosphere of the German city, most bankers changed their plans to create a post-Brexit European base in Amsterdam and opted for Frankfurt instead.
“One of the biggest issues we have with people is getting them here to see it, and then they’re pleasantly surprised at what they find,” said Hubertus Väth, head of the Frankfurt Main Finance lobby group.
Mr. Väth admits, however, that his title prediction the day after the Brexit referendum in June 2016 – that 10,000 jobs would move from London to Frankfurt – did not materialize. Instead, he now believes Brexit has created around 3,000 more jobs in Germany’s financial capital by June, including consultants and associated IT service providers.
“We anticipate that 1,000 additional jobs will be created in the coming months, which could expand at the start of next year, as 500 jobs are still being negotiated with regulators due to the Covid-19 situation” , said Väth. “The traders have been the big resisters so far.”
When Britain voted to leave the EU – a process culminating in the end of the transition period on December 31 – it sparked a scramble by rival financial centers across Europe. They were competing to attract the many jobs and assets that are expected to leave London as Brexit threatened the UK’s access to the Union’s single market.
France, Italy, the Netherlands and Spain have introduced tax breaks for rich financiers who settle in their country. Germany amended its rigid labor laws to make it easier for companies to fire highly paid “risk takers”, including traders in investment banks.
Emmanuel Macron, President of France, even welcomed 140 global industry and banking bosses to dine at the Palace of Versailles in 2018, urging them in English to “Choose France”.
Despite all these courtings, the expected flood of bankers leaving London has so far turned out to be more than a trickle. And the loot is distributed among many different cities. Most investment bankers and traders went to Frankfurt and Paris, while asset managers went to Luxembourg and back office operations went to Dublin and Warsaw.
Christian Noyer, former governor of the French central bank, said Brexit would herald a return to an era before the ‘Big Bang’ – the deregulation of the City of London in the 1980s – where finance was much less concentrated in one. only place.
“If we go back 30 or 40 years, there was a time when the financial center was much less concentrated in London. . . when the banks had more staff in Paris than in London, ”he says. “The movements may have been slowed down by Covid-19, but we’re going to have a lot more of these traders on the move at the end of this year and throughout next year.”
The future of the city
In a series of articles, the FT examines how the London financial center will perform in the decades to come as the Brexit negotiations reach their climax
French bank Societe Generale has moved around 300 jobs out of London. “All the banks have had to rebalance,” said Frédéric Oudéa, its managing director. “Those who had all their business operations in London had to repatriate people to take care of eurozone-related activities. There has been some change, but the magnitude has been relatively moderate. “
The end of the world forecast in a 2016 London Stock Exchange survey estimated that 232,000 financial services jobs could leave the UK as a result of Brexit.
Not only have far fewer jobs left the country, but many free financiers continue to operate at least partially in London – making weekly trips back and forth between the city and the mainland, at least before the pandemic complicates them. trips.
David Benamou, chief investment officer at French asset manager Axiom Alternative Investments, created a UK subsidiary of the company in 2013. Since then he has lived in London, while spending one night a week in a hotel next to his headquarters. Parisian.
Around 3,500 financiers have settled in the French capital since the Brexit vote, according to pressure group Paris Europlace, including senior executives from Bank of America, JPMorgan and BlackRock. But Mr Benamou is among those betting that City will remain a large enough market with enough talent to make the maintenance worth it.
“It took 20 years to make London the center of global finance. So, demolish it. . . I find it hard to believe that this can happen in less than 10 years, ”he said.
Yet Mr Benamou believes that instead of settling in London and expanding into Europe, the opposite is happening. “Now if I were to start a business from scratch, of course I would go from the mainland, because there would be no interest from the UK,” he said.
Davide Serra, founder of asset manager Algebris Investments and major donor to the Remain campaign, remembers his son’s disappointment shortly after Brexit. This is partly why he moved from London to Milan with his family in 2018.
“He told me that he was sad and that he felt lost because we are Europeans. With this feeling of being torn apart, I understood that I wanted my British children to have an international experience, ”said Mr Serra. While Algebris has offices in Milan, Rome, Luxembourg and Dublin, it makes round trips to its London base for a few days each month, “if Covid allows”.
People who move to Frankfurt often start by returning to the UK on weekends, according to Daniel Ritter, executive partner of Von Poll, a German real estate agent. “Many buildings here have been refurbished into serviced apartments, as many bankers who move here leave their families in London and return there on Fridays,” he said.
After the Brexit vote, there were fears that other European cities lacked housing and school capacity to cope with the new arrivals. But Paul Fochtman, director of the Frankfurt International School, saw only a steady trickle of Brexit-related admissions, which he estimated at just under 100 in total.
“We’ve always had people leaving London, but there’s a little more urgency now,” he said.
Brexit has also boosted applications from London for places at the Jeannine Manuel Bilingual School in Paris, from 50-60 a year before Brexit to a peak of 264 last year. There was a drop in 2020, but Bernard Manuel, the principal of the school, said: “We are seeing a substantial increase next year and very many phone calls from the big banks. . . a bank has just told us that it has 70 children who need places.
Jean Pierre Mustier, managing director of Italian bank UniCredit, said it was fine for lenders to move some staff out of London after Brexit due to high costs in the UK capital. “There will be an adjustment – it’s gravity at work,” he says. “Many banks will probably seek to relocate French staff to France, Italian teams to Italy and German teams to Germany.”
More than 7,000 wealthy Italian expats chose to return between 2017 and 2019 and benefited from a 50% tax exemption on their Italian income, according to data from the tax administration. The exemption was increased to 70 percent from this year.
Another benefit, whereby individuals pay an annual lump sum of € 100k on their foreign income, has attracted footballers like Cristiano Ronaldo and private equity executives who earned large sums of “interest” from the funds. redemption.
Luigi de Vecchi, president of Citigroup’s corporate and investment banking for Continental Europe, moved from Milan to Paris three years ago. However, he spent most of 2020 in his home country, Italy, because of the pandemic. From there he watched a flurry of newcomers.
“I feel like a real estate agency lately, I had around 30 acquaintances who asked me for advice on where to live in Italy,” he said. “People are prepared to pay rents which might be peanuts for the London market but which are very high for Italy.”
With many banks allowing most staff to work remotely during the Covid-19 pandemic, some are wondering if they still have to travel for Brexit. Still, European Central Bank supervisors suspect lenders are dragging their heels on staff relocation and using the coronavirus as an excuse. ECB warned last month: “Remote working arrangements do not change the fundamental need to relocate staff to the EU.”
Even Deutsche Bank, which initially identified 4,000 jobs likely to move, have moved only a hundred posts from London to Frankfurt, with 200 to 300 more to follow. The timing and exact number of additional movements depend on regulatory and political decisions.
Frankfurt-based public lender Helaba estimates that around 1,500 jobs have been relocated in the city and expects 2,000 to follow over the next two years. But that won’t make up for the jobs cut by Frankfurt-based lenders: Overall banking jobs in the city are expected to drop 3 percent to less than 63,000.
“It’s very unfortunate,” said Helaba chief economist Gertrud Traud. “Banks that need to relocate jobs are looking very closely at whether they really need these positions in the future.”
Additional reporting by Laura Noonan in New York, Owen Walker in London and Olaf Storbeck in Frankfurt