A German politician said on Thursday (18 August) he was trying to persuade foreign banks to make Frankfurt their home after Britain’s vote to leave the European Union, and outlined how Europe’s biggest economy wants to bolster its financial capital at London’s expense.
Thomas Schäfer, finance minister of the state of Hesse which includes Frankfurt, said he had spoken to London banks with an arm in Frankfurt as well as others, and sought to persuade potential movers that local labour law and tax were not overly onerous.
“We are listening very carefully to the questions that the financial sector has after the Brexit vote,” Schäfer, a member of Chancellor Angela Merkel’s Christian Democratic Union party, told reporters.
“We are campaigning for Hesse because the financial centre of Frankfurt has a lot to offer,” he said at a meeting, where numerous Union Jack flags were put on display.
If Britons vote to leave the EU, London’s financial centre faces losing one of its top money spinners – the trade in trillions of euros in derivatives – and the European Central Bank will be pushing hard for the business to move onto its patch.
Momentum growing behind Frankfurt?
Most German politicians have so far been reluctant to publicly push Frankfurt as an alternative to London. Many Germans remain hostile to banks after the financial crash.
Schäfer’s remarks suggest momentum may now be growing behind Frankfurt, less than two months after Britain voted in a referendum to leave the European Union – a process referred to as Brexit.
Schäfer did not, however, offer any prospect of special deals to cut tax or any other concessions. He said the city’s infrastructure and the fact that it hosted the European Central Bank were reason enough to move there.
Schäfer said he had held talks with “all kinds of players” but that many had wanted to keep the contact secret. “There is a fear of being considered disloyal in the London community,” he said.
The comments come as Germany’s banks, worried that Frankfurt could get left behind as rival cities such as Dublin or Amsterdam compete for London’s business, urged the country’s politicians to step up their efforts.
The head of Germany’s BDB banking association had criticised politicians earlier on Thursday for being slow to act. “My impression is that France is being more active in support of Paris,” Michael Kemmer told journalists.
British Prime Minister David Cameron once gleefully offered to “roll out the red carpet” for French executives wanting to escape staggering wealth taxes.
Kemmer also urged Germany to abandon plans to introduce a tax on financial transactions, a levy backed by the country’s Minister of Finance, Wolfgang Schäuble.
Schäuble’s support for such a measure is, however, largely symbolic and there is little prospect of banks that move to Frankfurt facing such a trading levy. Years of talks to introduce the charge in Europe have yielded nothing.
Many banks or fund managers based in London are there in part because it allows them to sell their products within the wider European Union of 28 countries.
That would most likely change if Britain were to leave the bloc. A bank based in Germany or France, however, would still have its ‘passport’ to sell across the EU.
Frank Niehage, head of FinTech Group, a financial technology specialist, recently said there had been a rise in enquiries from London banks.
“We know … that they are looking here for alternative office space for their employees out of London,” he said.
82% of British financial technology companies want the United Kingdom to stay in the European Union, according to recent a poll by the industry association. EurActiv’s partner La Tribune reports.
Britain’s shock vote to leave the EU on 23 June has sparked questions over its role as Europe’s financial capital, with cities like Frankfurt, home of the European Central Bank, and Dublin also hoping to cash in on any move out of London by financial companies.
The issue of whether euro clearing houses can remain in the British capital is set to be one of the most contentious issues as Britain seeks to negotiate its future trade relationship with the EU after its departure.
French President François Hollande warned that Britain’s City of London financial district would have to give up its role in processing euro currency transactions after it leaves the European Union.
Britain has jealously guarded its status and won a recent EU court decision against the European Central Bank in order to keep hosting the euro deals.
Britain's City of London financial district would have to give up its role in processing euro currency transactions after it leaves the European Union, French President François Hollande warned on Wednesday (29 June).