The countdown to Brexit has begun. Politicians and economists are warning of the negative impact Britain’s departure will have for both the domestic and EU economy.
Naveena Kottoor –
You never waste a good crisis, is the mantra of Hubertus Vaeth, head of Frankfurt Main Finance, a group backed by the local government that promotes the city.
While Europe has been entering crisis mode regarding the official start of the Brexit process, by which Britain will leave the European Union, Vaeth has been polishing his sales pitch to lure bankers from the City of London to Frankfurt.
More than 250 foreign banks are currently based in London, employing around 150,000 people.
Almost half of European investment banking activity is currently conducted there. But, as the future of the economic relationship between Britain and the EU is hazy, Vaeth is hoping that foreign and British banks will consider moving to Frankfurt.
According to Vaeth, the first contacts between US banks and Frankfurt date back to 2015, following a request by the US Federal Reserve asking major American financial players to come up with a contingency plan in the case of Britain’s departure from the EU.
Since the referendum in June, more talks in the US, Japan, China and the Middle East have taken place. Vaeth says Frankfurt is now “on the most relevant shortlists, of major US, Japanese, British, Swiss and Chinese banks.”
Frankfurt’s sales pitch – “It’s structurally close to the City of London, hosts the headquarter of the European Central Bank, and is the financial centre of Europe’s biggest economy,” says Vaeth.
At the same time “labour costs are significantly lower than in almost all competing financial centres, with the exception of Dublin.”
Competing with Frankfurt’s pragmatism has meant other European competitors seeking to woo bankers have had to revert to other arguments, such as asking whether Frankfurt is as interesting a place to live as Luxembourg, Madrid, Amsterdam or Paris might be.
“Those who think that Frankfurt is boring, have probably never been,” Vaeth quips, pointing to techno parties, music festivals and three contemporary art museums. “The city has very much evolved. It has become really international, and almost 40 per cent of the population are foreign-born.”
While the race for a big slice of the finance pie is dominated by slightly more than a handful of European cities, the field of competitors who want to host the European Medicines Agency (EMA) is more crowded.
As many as 22 European countries – the latest being Romania – have said they want to bid for the body, which is the official one-stop shop for drug approvals across the EU. It employs 890 full-time staff.
Hosting EMA is seen as having a substantial positive knock-on effect for any country’s medical and pharmaceutical industry. Currently, Croatia,
Bulgaria, Cyprus, Romania and Slovakia host no EU agencies.
While Romania is a leading EU member when it comes to the number of medical graduates, since EU accession, many Romanian doctors, nurses, dentists and pharmacists have flocked to richer EU countries.
The hope it that securing EMA could help quell some of that
medical brain drain.
For all the talk about Brexit-related benefits, John Springford, director of research at the Centre for European Reform in London, warns that “overall Brexit is likely to be costly for everyone.”
“It is quite unlikely that any country will benefit from Britain leaving the EU. Most of the costs will be in Britain, but there will be costs for other member states as well,” he says.
“Trade barriers mean less trade, especially for Britain’s largest trading partners, such as France, Germany, and The Netherlands.”
Edit Zgut, a Hungarian foreign policy analyst based in Budapest agrees.
“For the Czech Republic, Poland, Slovakia and Hungary, Brexit-induced impacts on exports would be visible, but digestible. In terms of trade, Slovakia is going to be the country most affected, as it has the least diversified export structure,” Zgut says. — dpa