A new study suggests that Frankfurt has come through the financial crisis in far better shape than London.
Since 2008 banking headcount in the German financial centre has fallen by only 2%, according to a study by Helaba, a German state-owned Landesbank. Over the same period financial services headcount in the City fell by nearly 30% according to London-based think tank CEBR.
Using its "bespoke economic models" and "renowned research," the CEBR estimated last November that there were 256,000 people working in 'City jobs' (defined as wholesale financial service sector) in London. The CEBR said this was down from around 325,000 in 2008. Helaba estimates that there are around 74,500 people working in Frankfurt, down from around 76,000 in 2008.
If the CEBR and Helaba's figures are correct, 69,000 jobs have disappeared in London since the financial crisis; 1,500 jobs have gone in Frankfurt.
The discrepancy between the job losses fuels fears that London is losing out as a financial centre and that Frankfurt is a beneficiary. There was a time - back in the late 1990s - when Frankfurt was seen as a serious contender for the position of Europe's leading financial hub. In 2008, for example, the Economist said that London was at risk of being undermined by Frankfurt as banks like Deutsche and Dresdner repatriated their investment banking operations to Germany. This didn't exactly happen: Deutsche continues to house its investment bank in London, although Dresdner sold itself to Commerzbank in 2009 and Commerzbank did indeed refocus on the German market.
The CEBR is also predicting that headcount in the City won't recover for years. In the meantime, Frankfurt is reveling in its new position as the home of Europe-wide banking regulation under the European Central Bank. "Apart from enhancing its image on an international level, the creation of a unified banking supervisory authority under the umbrella of the European Central Bank (ECB) will also mean the recruitment of further staff," said Helaba in today's report. Earlier this week, the The Wall Street Journal predicted that the ECB will need to hire 900 new Frankfurt-based supervision staff in order to fulfill its new regulatory mandate.
However, while headcount in Frankfurt is incontestably expanding, not everyone agrees that financial services headcount in London has plummeted. Figures from TheCityUK, an organisation tasked with promoting the City, suggest that total financial services employment in London actually increased 0.5% between 2007 and 2012. Raquel Hughes, UK Strategy Director of TheCityUK, said their figures are very thorough and are based on a survey of companies employing 100,000 financial services staff in London. "We are very confident in our figures," Hughes said, declining to comment further on the discrepancy with the figures produced by the CEBR. The CEBR did not immediately return a call to explain its methodology.
Depending upon who you believe, therefore, the City of London is either in terminal decline, or it isn't. Either way, Frankfurt appears to be doing ok.
The real question is what happens next. UK business and enterprise minister Michael Fallon has said the European Union's proposed bonus cap presents a 'special risk' to London and that the cap is a serious threat to British banking jobs. Late last year, the European Union handed the Frankfurt-based European Central Bank broader supervisory powers for the European banking system, with oversight responsibility for all banks within the eurozone. This stoked fears that the UK will ultimately end up isolated or forced to adhere to punitive EU regulations. There is “no rationale” for the City remaining an “offshore” financial centre to the eurozone, said Christian Noyer, France’s central bank governor in November. Frankfurt is waiting in the wings.