Some banks have already started choosing alternative headquarters after UK has left the European Union, with Frankfurt emerging as the preferred destination. Frankfurt appears to have taken an early lead over other cities such as Paris and Dublin. Nomura, a Japanese bank, is one of the banks to move their headquarters to Frankfurt. It is the largest brokerage firm in Japan. This comes even after Prime Minister Theresa May lost her majority, which increased the chances of UK seeking a softer Brexit deal that would lead to a reduced impact on its financial services industry. Other banks seeking to relocate include Japan’s Daiwa Securities, Goldman Sachs and Morgan and Stanley.
Frankfurt has emerged as one of the favoured options because it is home to the European Central Bank (ECB). Since the arrival of ECB in 1998, the city strengthened its claim as the financial hub of the Eurozone. It is now home to 155 foreign banks. Other cities that Nomura considered before settling on Frankfurt include Paris, Munich and Luxemburg. However, it remains to be seen if the city and ECB will be able to handle the influx of banking activity projected in the city after Brexit.
How Frankfurt and London compare
The difference in the financial sector size between London and Frankfurt remains vast. While Frankfurt has 75,000 employees, London has between 400,000 to 700,000. London is also a global city with lots of diversity, while Frankfurt can be considered to be something like a provincial outpost that only focuses on banking. One of the biggest advantages Frankfurt has over London is that there is enough space to cater for more than the estimated 10,000 financiers the city expects to arrive. There are also numerous new developments planned. In addition, most banks will find it more attractive to gain operating licences in Germany and therefore the rest of the EU, than negotiating 27 bilateral agreements if they choose London.