Tomorrow is Brexit D-day. If the UK decides to leave the EU, some jobs currently in London are likely to move to Paris or Frankfurt. For any front office bankers forced to relocate, there’s some bad news – you’re likely to get a lot less money in your pocket.
Investment bankers in London are paid more than their counterparts in Frankfurt and Paris. The UK tax regime also means that they end up with higher take-home pay after the government's taken its share. Punitive social services costs in Frankfurt and Paris, together with relatively high levels of income tax, means that net pay for bankers in the continent's financial centres is significantly less.
Analysts in London earn 11% more than their counterparts in Paris on net basis, and juniors in Frankfurt earn 25% less than those in the UK, according to figures from salary benchmarking website Emolument.com. Managing directors in London earn £450k ($660k) in London, compared to £253k ($371k) in Paris and £417k ($612k) in Frankfurt.
Net, this means MDs earn 39% less in Paris than London and 15% less in Frankfurt. But, of course, cost of living comes into play. Gargantuan rental prices in London push up the cost of living significantly - London rental costs are 35% higher than in Paris and 61% higher than in Frankfurt.
Mercer’s cost of living survey, released today, suggests that costs are creeping up in Paris and Frankfurt, however. Paris is the 44th most expensive city in the world – up from 46th in 2015 – and Frankfurt is 88th (up from 98th last year). London ranks 17th, but this is down from 12th last year.
The fact that London bankers earn more than those in Paris or Frankfurt is not news. There are 2,075 ‘high earners’ in investment banking, bringing in more than €1.9m, according to figures from the European Banking Association. Paris has 116 people who fall into this bracket, and there are just 82 in Germany.
But an influx of investment bankers into Paris or Frankfurt is likely to change the dynamic of the industry there anyway. Pay in London is driven by the need to secure the right talent and pay these people competitively. Compensation will likely adjust if Continental Europe suddenly finds itself awash with bankers.
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