Courtesy of Mish.
German cities have their eyes on London, hoping to reduce its lead role as Europe’s largest financial center. France would like to do the same.
However, work rules make it much harder for companies to shed employees in Germany and France than in the UK.
A second problem is the likelihood of a financial transaction tax that Germany and France have desired for years. With the UK out of the way, will the EU plow ahead with a tax?
Targeting London
Please consider Frankfurt Vies for UK Banking Jobs Post-Brexit.
Germany is considering changing its labour laws to make Frankfurt a more attractive hub for banks looking to move staff out of London after Brexit, in the latest attempt by EU countries to woo financial institutions from Britain.
People briefed on the plan said Germany was looking at imposing an upper salary limit on employee protections of €100,000 or €150,000, which would make conditions such as redundancy terms less generous. “Labour law wasn’t designed for people like this,” one person with knowledge of the situation said.
However, the proposal comes as leading Wall Street banks indicated this weekend that they were more likely to relocate certain operations to New York than the eurozone if they shifted them from London. James Gorman, chief executive of Morgan Stanley, said that although the bank was looking at whether it needed a new headquarters in the eurozone, he thought “the big winner is going to be New York”.
One of Germany’s main drawbacks as an international financial centre, often cited by bank bosses, relates to labour laws that make lay-offs difficult and costly. Minimum statutory redundancy terms, for example, are twice as generous in Germany as in the UK. That is a particular issue for banks, which tend to hire and fire more readily than other sectors, in line with cyclical business fortunes.
Germany, like France, has other labour restrictions, including special protection for older workers and those with families. One employment lawyer said a senior banker earning $1.5m in total remuneration could typically be made redundant with a payout of $150,000 in London, but the cost could currently be 10 or 15 times that in Frankfurt.
If Germany presses ahead with the reform idea, it could confirm Frankfurt as the natural choice for City of London employers looking to shift jobs to another European location and safeguard access to the single market once Britain has left the EU.
Fresh data compiled by the Financial Times show that, London aside, Frankfurt is by far the dominant EU location for bank operations. Seven of the 10 global banks whose European operations were analysed by the FT had a subsidiary in the German financial hub, ahead of Luxembourg with five, and Paris and Dublin with four apiece.
Spotlight on Financial Transaction Taxes
Bloomberg reports EU Sagas of Greece, Transaction Tax Back in Focus.
