International banks have started looking at office space in Frankfurt as they consider whether they will need to shift some of their European operations out of London if Britain votes to leave the EU.
London is the world’s principal location for euro-denominated trading, a $2tn-a-day market, even though the UK is outside the single currency area. The UK has so far managed to foil European Central Bank attempts to prevent clearing houses outside the eurozone from handling the currency — and the UK’s EU membership is widely seen to have played a central role in blocking the move.
Tarek al-Wazir, the economy minister in Hesse, the German state in which Frankfurt is located, said a number of foreign banks had begun to make inquiries “within the last two months”, although the moves were preliminary and no contracts were yet in place.
Mr Wazir declined to say precisely how many banks were looking at office space in Frankfurt. Another person briefed on the matter put the number at “a good half dozen” US and Swiss banks, with one lender from each of those countries further advanced in their planning than the others.
Between them, the two banks were considering moving a “three-digit” number of jobs from London to Frankfurt in the event of a Brexit, the person said, including some back office and trading jobs linked to their derivatives businesses. They did not disclose which banks were involved.
“I think a lot of people in Britain are creating illusions of what it will be like for the UK if it votes to leave the EU, and what it means for the City of London,” Mr Wazir said in an interview with the Financial Times. “They are unaware that banks are looking at the situation and asking: ‘where else could we go?’”
Should a Brexit take place, how much business would move would depend on the terms of the new relationship between the UK and EU. However, rival financial centres are already positioning themselves to benefit if business does leave the city.
Two weeks ago, Paris’s financial elite hosted a conference where they promised to “roll out the red carpet” for London’s bankers. On Monday, the chief executive of Euronext warned that jobs would move to Dublin, Paris or Amsterdam if Britain left the EU.
Some bankers in London are sceptical about the prospect of jobs moving to Frankfurt, as opposed to other financial centres. Frankfurt is a far smaller city than London and labour laws in Germany are widely seen as more onerous than those in the UK, where it is easier to lay off staff.
However, Mr Wazir said Frankfurt was in a good position.
“Of course the banks will not move all their business from London to Frankfurt,” he said. “But Frankfurt is going through a phase of positive development. We have the European Central Bank here and we are at the heart of Europe’s biggest economy. We could get a trend in a particular direction.”
Additional reporting by Ralph Atkins in Zurich and Martin Arnold in London