Germany’s financial hub Frankfurt is reckoning on 8000 new banking jobs as a result of the Brexit exodus from the city of London.
“We expect at least half of the London-based financial jobs to be moved to Frankfurt,” explains Gertrud Traun, chief economist for the Hess-Thuringia State Bank, which recently released a new study putting Frankfurt ahead of European rivals Paris and Dublin.
By the end of 2019, a four per cent increase in employment is expected in the city’s banking sector. In total, up to 88,000 additional jobs are expected to be created by the bankers’ influx – in the transport industry, construction, education and health sectors.
Some 15 financial heavyweights in London have indicated their intention to relocate to the city on the River Main, including the American heavyweights Citigroup, J.P. Morgan and Goldman Sachs. The four Japanese banks – Nomura, Daiwa Securities, Sumitomo Mitsui and the Mizuho Financial Group – have already opted for Frankfurt. The British bank Standard Chartered and the Swiss UBS have also mooted Frankfurt as their new base. Frankfurt came seventh in a recent quality of life survey, ahead of Paris, Amsterdam and Dublin. London was 40th on the list.
But not everything is a Brexit bonus for Europe’s powerhouse economy. The vaunted car industry is already suffering because of the UK vote to leave.
“Brexit and the related lower demand in Britain caused by exchange rates has contributed to a 2.0 per cent fall in car exports, to 4.3 million vehicles,” said Matthias Wissmann of the German Federation of the Automobile Industry.
The UK is is the biggest export market by unit sales and the second-biggest in cash value. German carmakers had around 20 per cent of global car market share last year with 16.4 million vehicles sold and produced around half of all new cars registered in Europe.
The German Chamber of Commerce and Industry (DIHK) predicted a no-deal Brexit – based on export figures of 2016 – would hit the car industry with customs duties of 2.35 billion euros.
DIHK general manager Martin Wansleben said: “The clock is ticking: On 30 March 2019 the British are probably out of the EU. This makes a Brexit with no follow-up agreement more likely. The German economy will be seriously impacted.”
If the EU and the United Kingdom were not to agree on an agreement, trade would again be subject to WTO rules, which would result in significantly higher customs burdens. “Quick solutions are in demand because cherry picking by the UK is not allowed in negotiations,” added Walsleben.
Last year Germany exported cars worth 20.8 billion euros to the UK.
Taking a hit
While Brexit no longer dominates the media or the political mood in Germany, its very being poses a serious threat to finances. For German taxpayers will have to plug a 3.8 billion-pound hole in the EU budget after
Britain leaves next year. That is calculated as the German contribution to an overall shortfall of €10.2 billion when the UK pulls out in March 2019. For Germany this represents a 16 per cent hike in payments to Brussels. The sums were calculated by the Funke Media Group based on a new EU parliamentary study.
The EU is uncertain whether individual states can pony up such huge sums and is considering both new continent-wide taxes or budget cuts in the face of Brexit.
“Brexit not only increases the financial burden for the EU-27, but also changes the distribution of burdens,” according to the report. Germany and countries like the Netherlands and Sweden are currently benefiting from a discount on the ‘British rebate’, with which London was able to reduce its payments. These perks fall away after Brexit. According to the German report, France would have to pay €1.2 billion more, Italy around one billion. To date, Germany has paid net more than 14 billion and France 5 to 6 billion euros per year. However, how much must be added to each country in the end depends on whether the EU is forced by Brexit into austerity mode.
But whichever way Brexit falls – hard or soft, immediate or protracted – Germany will suffer more economic hardship than Europe as a whole.
A study by the German Institute for Economic Research found Germany’s GDP could fall up to 0.4 percentage points, while the eurozone’s economy could lose 0.2 per cent points.
“The German economy suffers more from uncertainty than the whole euro area, because our manufacturing sector is very export-oriented and will directly feel the impact of a lower demand in the UK,” said Malte Rieth, one of the researchers.
Whatever happens, it looks like it will be ugly out there....
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