The battle to become the EU’s next financial hub post-Brexit is currently unfolding, with Dublin and Frankfurt positioning themselves in a two-horse race. Just one week after a tranche of banks and asset managers were said to be signing deals to relocate to Dublin, Frankfurt has resorted to waiving rigid labor laws as a further means of attracting lenders.
Last month, Nomura and Daiwa Securities Group became the first major lenders to solidify their plans to relocate their EU base of operations to Frankfurt. The decision ended months of contemplation that saw banks opting for a wait-and-see approach in regard to the severity of the eventual Brexit. Plans were ultimately put in motion following UK PM Theresa May’s harsh rhetoric of suspending passporting rights in the UK.
Frankfurt boasts a number of advantages for incoming and prospective banks, namely its geostrategic location in the heart of the bloc. In addition to a talented labor pool, the city is an economic powerhouse despite low rental costs, relative to its competition. However, the city faces one key issue – a dearth of available office space as many other groups have since gravitated towards the city.
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Revision of labor laws opening up doors
In its latest bid to secure prospective lenders, Frankfurt is sweetening the deal by exempting specific components of its labor laws – more specifically, labor laws in Germany mandate big payouts for redundancies and make it more difficult to fire personnel. These aspects had proven problematic to many banks, especially given the nature of the industry presently. Perhaps no sector has seen higher turnover in recent years than the banking space, with thousands of job cuts.
However, in a bid to placate skeptical banks, Frankfurt has now doubled down on its incentives. Initially, proposals were floated to exempt only high earning banks from these rules, a stance that has now been extended to entire banking personnel structures, or more aptly put ‘risk takers’.
Still, the patchwork solution is not a dealbreaker, with many banks still exercising skepticism over its implementation and longevity. Nonetheless the move is quite timely as many banks are simply on the fence about where to relocate to, with many looking to Frankfurt, Dublin, Amsterdam, Paris, Luxembourg, and others.
Last month, as many as twelve banks and asset managers operating in the UK had signed deals to relocate to Dublin. Many of these groups have already begun procuring banking licenses, real estate space, trading floors, and other measures. According to Ireland’s Development Authority (IDA), the group had fielded as many as eighty inquiries over the past year regarding relocation to the Irish capital.