Author Mark Richards
With just over 18 months to go until the UK is due to leave the European Union many businesses are starting to plan for life after Brexit, with the German city of Frankfurt looking to be the preferred destination for many businesses. Meanwhile, the Brexit negotiations continue to be mired in disagreement…
So where should we invest our money? In property, obviously. And in London – after all, Google and Facebook are planning major investments in the capital and according to City AM, ‘the London jobs boom just keeps going.’
Then there is HS2: when it is in operation surely it will make it easier for everyone to get to the capital? But whereabouts should we buy in London? Because house price growth in London is as varied as house price growth around the UK. Recently, Barking and Dagenham – one of the few parts of London with average house prices still below £300,000 – has been topping the charts, while more well-known areas like Hammersmith and Fulham have actually seen prices fall. So maybe it is time to jump on the District Line and head out to Barking…
…Or maybe we should go to Germany instead – specifically, to Frankfurt.
Despite the current squabbles in Brussels (more of that spat later) Brexit is going to happen. Companies are starting to accept that and – wanting certainty above all things – they are starting to plan for life after Brexit. They will need European headquarters, and increasingly they are looking to establish those headquarters in Frankfurt.
It will mean renouncing season tickets at Spurs and Arsenal in favour of Die Adler – the Eagles as Eintracht Frankfurt are nicknamed – but sacrifices have to be made. Then again, the way Arsenal fans are feeling at the moment…
Welcome to Frankfurt
Frankfurt is the largest city in the German state of Hesse, with a population around 750,000. It is in the west of Germany, and around 3½ hours from both Brussels and Amsterdam. For a relatively small city, it punches above its weight and is home to the European Central Bank, the German Federal Bank and the Frankfurt Stock Exchange. Culturally it hosts the Frankfurt Motor Show and Frankfurt Book Fair – both the biggest in the world. And Frankfurt airport is one of Europe’s major hubs: as a place to do business, it is undeniably attractive.
Is it as attractive as Paris, which famously sent a bus to London in the immediate aftermath of Brexit and has been rolling out the red carpet to bankers ever since? You would not have thought so – but Frankfurt appears to be winning the war for post-Brexit jobs, with many of Europe’s leading financial institutions already announcing plans to relocate jobs to the city.
Business is starting to relocate
What businesses value above all things is certainty: they cannot plan without it. Right now – as we outline below – the Brexit negotiations are not going well and you would not bet against many details still being unresolved when Britain leaves the EU.
Many banks’ patience already appears to be wearing thin: they need to know what the regulations will be for trading foreign exchange and they need to know what access they – and their key customers – will have to the single market. A base in Europe answers a lot of these questions and Morgan Stanley, Citigroup and Standard Chartered have already chosen Frankfurt as their new European base. Goldman Sachs and UBS have also promised to move jobs to the city.
Predictions for the number of bankers due to descend on the city vary from the tens of thousands to over 100,000. Whatever the final figure, it will be substantial – and jobs will also be created in other sectors: one recent study suggested that Frankfurt could gain 10,000 new banking jobs and up to 80,000 jobs in other sectors of the local and regional economy.
One of the principal advocates for Frankfurt has been German Finance Minister Wolfgang Schauble – described as an ‘enthusiastic emissary’ for the state of Hesse. There is, however, some doubt as to whether Schauble will remain as finance minister after this month’s German elections: he is 74 and has been a member of the German parliament since 1972 and finance minister since 2009: you would think he was due to a rest. Even if Schauble stands down, however, he has helped Frankfurt to become the pre-eminent destination for banks to relocate jobs from London and/or establish a base within the single market.
The Brexit negotiations
We have just had another month of Brexit negations. Or have we? David Davis – our man in charge of exiting the EU – has claimed that ‘good progress had been made.’ His EU counterpart, Michel Barnier, has taken a rather different tack, saying that the UK was “demanding the impossible.”
Meanwhile, Jean-Claude Juncker, the President of the European Commission said that none of the UK’s position papers was “satisfactory” and warned that there would be no discussions of a free trade deal until progress was made on the so-called Brexit bill, the border with Ireland and the rights of EU citizens. David Davis responded that the EU needed to show ‘imagination and flexibility’ – two words which have not previously been associated with the Commission.
Back in the UK, the war of words continued: a group of pro-Brexit economists argued that removing all trade tariffs and barriers would generate an annual £135bn boost to the UK economy. Those in favour of ‘soft’ Brexit continued to push for membership of the single market as a transitional arrangement after Brexit which (in case you have forgotten in all the excitement) is scheduled for March 29th, 2019.
Meanwhile, Prime Minister Theresa May declared that she wanted to fight the next election (a move greeted with equal measures of scepticism and horror within the Conservative party) and jetted off to Japan to begin talks on a post-EU trade deal. Back in Brussels, the boys continued bickering, as International Trade Secretary Liam Fox said the UK would not be ‘blackmailed.’ Across the table, Michel Barnier complained that so far the talks had made “no decisive progress.”
You can only hope that more progress will be made after the German elections in the middle of this month: unfortunately, we then have the UK political conference season and its attendant machinations and posturing. Meanwhile, the steady flow of businesses contacting Frankfurt estate agents will continue…