Brexit aside, it hasn’t been a good week for financial services professionals in the City of London. First, Nomura eviscerated its flow credit trading business; then SocGen announced its own restructuring programme. Further cuts are coalescing in the shadows, with Barclays under pressure to curtail its trading operation and Commerzbank-Deutsche threatening devastation on a scale not seen for a decade.
In the circumstances, the potential for Brexit to be delayed until – say – June 2019, isn’t providing much cheer. Nor is the possibility for a longer delay navigated by a new pro-Brexit British prime minister. It doesn't bode well if you're a banker or trader who loses your job.
“Sentiment in London is falling off a cliff,” says the managing consultant of a fixed income headhunting firm, speaking anonymously. “There are hardly any banks recruiting here and with each week that goes by I see more and more people entertaining a move to Paris or Frankfurt.”
The recent report from think-tank New Financial put the French and German cities as the key beneficiaries of Brexit-inspired bank moves out of the UK. Around 40 London finance firms have each chosen Paris and Frankfurt as their EU hubs in a post-Brexit world.
“The atmosphere in Frankfurt is just a lot more positive [than in London],” says the London headhunter, who has begun working in Frankfurt too. “You have tens of firms that growing there and a medium-term commitment to a presence. Frankfurt is a growth market: jobs in Germany seem more stable, whereas in London there’s a sense of impermanence .”
Nils Wilm, managing director of Frankfurt recruitment agency Bankenwelt Executive Search, shares this enthusiasm. The Frankfurt market has, “dynamism,” says Wilm. “British and U.S. and Japanese banks are all adding staff in Frankfurt. There’s momentum.”
Citigroup, Goldman Sachs, Morgan Stanley and UBS are among the banks relocating to Frankfurt because of Brexit. In theory, most plan to create sales and trading operations in the German city. In fact, Wilm says the hiring so far has predominantly been in risk and compliance, with hundreds of London front office staff on notice to transfer to Frankfurt immediately if a hard Brexit takes place. The Financial Times today enumerates the ways in which banks in London plan to avoid relocating actual traders and client-facing bankers after Brexit (eg. Back-to-back trading and the use of European ‘chaperones’ on cross-border EU deals involving London), but regulators are pushing for a presence on the ground.
Frankfurt fatigue, for the moment
Not everyone concurs with the picture of Continental European financial centres as thriving hubs waiting to embrace London’s wan and weary.
Tim Zuehlke at Frankfurt-based FRED Executive Search says the German hiring market is buffeted by banks' global revenue pressures too. Brexit-related hiring has slowed in the Germany city as banks wait to see what transpires, says Zuehlke. Moreover, if and when a Commerzbank-Deutsche Bank merger takes place then Germany will be ground zero for the two banks' layoffs. - And the recently-passed law making it easier to cut Frankfurt bankers earning more than €220k will afford local high-earning German bankers far less employment protection than in the past.
Paris has not been absolved of its own wave of redundancies with SocGen cutting around 700 jobs there and BNP Paribas expected to unveil its own restructuring plan next week.
This might be why even if London bankers are turning their eyes to Europe, their feet have yet to (voluntarily) follow. For now, even the ebullient Wilm says he’s given up trying to persuade people in London to take jobs in Frankfurt. – He says 80 to 90% of them refuse because they think it’s a “smaller cluster.”
This will likely change. As U.S. banks move operations from London, Wilm predicts that pay will rise. – He’s already seen instances of banks doubling the salaries of Frankfurt staff who try to leave: “It’s not easy to recruit here. Banks are aware of this and they anticipate recruitment becoming even more difficult, so they try not to let people go.”
As Brexit crystallises, Frankfurt and Paris could yet become akin to Hong Kong and Singapore after the financial crisis. – Havens for redundant bankers in difficult times. For the moment, London's unwanted bankers are stuck in the purgatory of Brexit uncertainty. "If you lose your job in the City now, you'll need to live on the money you've saved in the last five years," says the fixed income headhunter. "There's nothing going on. - People are starting to think there's nothing left for them here."