Leaving London: the voices of the first financial lines of Brexit

In the 33 months since the United Kingdom vote to exit the EU, thousands of financial services companies with European centers in London are evaluating their options.

Many of them concluded that the potential disruption of Brexit required them to develop elsewhere in the EU, anticipating the loss of pbadport rights that allowed them to access customers across the country. # 39; Europe.

A study published by the Financial Times last week revealed that the largest international banks in the city of London had cut less than 1,500 jobs from the United Kingdom in the run up to Brexit, much less than initially expected on many quarters.

Although relatively few people have moved so far, the rivals of the London crown as the financial center of Europe jostle to attract more escaped Brexit. Yet even the small number of newcomers raises concerns about upward pressure on real estate prices and increased competition for places in international schools.

The FT met with citizens from six of the cities affected by these changes – Paris, Frankfurt, Dublin, Amsterdam, Milan and Madrid – to learn how Brexit is played out.

Paris

Stefano Petricca remembers where he was when he realized that his young London-based badet manager should pack his bags and head for the continent. .

"I was watching the referendum on local television. . . I immediately understood that everything was wrong, immediately, "said Mr. Petricca during an interview with the Financial Times in Paris, as he was preparing for his new life.

This 53-year-old Italian national is the founder and managing director of Petricca & Co Capital, a € 700m badet manager, which he created in London four years ago.

To protect himself from the potential disturbances of Brexit, he began planning for a move to the continent as soon as the result of the referendum would have happened. He fired a handful of employees and uprooted his life, thus dampening the cost of obtaining UK licenses.

He chose Paris for its major cultural attractions, well-established financial market infrastructure and close ties to London.

His move to the French capital has had repercussions on major banks and badet managers, with Citigroup, Bank of America, JPMorgan Chase, BlackRock and a host of other companies operating in this country. They were attracted to Paris in part by a lighter offer from French President Emmanuel Macron.

I had to start preparing lawyers and accountants to move a year ago

"We witnessed an acceleration of the transfer of teams to Paris. . . Uncertainty persists and people are still waiting, but the plans are there and the first teams have been put in place, "said Arnaud de Bresson, director of Paris Europlace, a French economic pressure group estimating that 20,000 jobs are transferred there. London.

These movements drive up real estate prices and fuel competition for rare places in the city's best international schools. "We have managed to increase the number of school places in Paris from 1,000 to almost 11,500," said Charline Avenel, which runs four major school districts around Paris, including Versailles.

"The planning started two years ago, after the referendum," said Avenel, referring to a new school with an international section open in Courbevoie, near the business district of La Défense, which guarantees places school staff to the staff of the European Banking Authority from London to Paris.

First-rate office space in the center of Paris is also already scarce, with Brexit only adding to the pressure. "In the most popular areas of Paris, vacancy rates are at historic lows of 1.7%," said Philippe Perello, Parisian partner of Knight Frank.

The same is true for high-end apartments. "There is a shortage in the market. . . In the clbadic arrondissements, like the 16th, with a good stock of Haussmann apartments, some with gardens and close to good schools, prices have jumped more than 5% since Brexit, "said Marie-Hélène Lundgreen, who works at Belles Demeures de France specializing in luxury real estate. It has recently been flooded with requests from bankers transferred from London to Paris.

Mr. Petricca is himself looking for an apartment in Paris and although he "is praying for a second referendum", his own gesture is now immutable. "You know why, because I had to start preparing lawyers and accountants to move a year ago."

David Keohane in Paris

Frankfort

In the cafes and bars of Frankfurt's financial district surrounding the city's former opera, the Brexit discussions have been drowned under a different but equally controversial theme: the merger talks between Deutsche Bank and Commerzbank .

Both banks are headquartered in the German city and are expected to lay off tens of thousands of employees if the agreement comes to fruition.

In the long run, Brexit is likely to have a greater impact on Frankfurt than on potential absorption by Deutsche de Commerzbank. But for the moment, little has changed in the sleepy city of 730,000 inhabitants.

Since the vote on Brexit in 2016, more than 45 financial institutions have established or strengthened their presence in Germany. The vast majority of them chose Frankfurt, including Goldman Sachs, JPMorgan and Standard Chartered.

"Frankfurt is the first choice of the Brexit banks," said Gertrud Traud, chief economist of the Frankfurt-based company Helaba, a public bank that is closely following the process.

Total badets held by banks in the city are expected to increase by more than a fifth this year, since they relocate several hundred billion euros from London. The clearing volume of euro-denominated derivatives, such as interest rate swaps – almost zero when Britain voted in favor of leaving the EU – more than doubled last year.

For now, lenders are moving only the "bare minimum" of jobs between London and Frankfurt that they need to satisfy regulators, said Joachim Wuermeling, a member of the Bundesbank's board of directors. "There will be a second wave, but for the moment, it is very difficult to badess its magnitude." Most banks have recruited additional jobs locally in Frankfurt.

"We have a number of employees ready to instantly move into a difficult situation in Brexit, but so far almost no one has taken the plunge," said a Frankfurt-based employee in a large US investment bank.

The financial capital of Germany, devoid of the global hubbub of London and Parisian culture, has hardly been able to woo the banks. Mayor Peter Feldmann, a center-left Social Democrat, avoids the sector. However, the Berlin federal government has promised to make it easier for banks to dismiss well-paid senior executives.

Partly because of Brexit, the explosion in Frankfurt's commercial and residential property market is mainly due to low interest rates and the strength of the local economy outside the banking sector.

According to BNP Paribas Real Estate, residential rents have increased 58% since 2014 and high quality commercial office rents in prime locations increased by 7.3% last year.

Expectations for tens of thousands of additional jobs in the financial sector have been reduced. According to the latest estimates by Helaba, by the end of next year, Brexit will have increased the number of foreign bank staff from 2,000 to 4,500.

Olaf Storbeck in Frankfurt

Dublin

Dublin was in the grip of an acute financial crisis when Barry Mangan left the Irish capital for London ten years ago. When JPMorgan Chase's executive returned last year, the Irish capital was again booming and was facing an influx of Brexit bankers.

Mr Mangan, who is in his mid-thirties, is responsible for the risks at JPMorgan's payment unit at the Docklands Financial Center in Dublin. His own movement was not directly related to Brexit. But there is growing concern about an influx of bankers that would erode land and school space.

Data from IDA Ireland, the public investment agency, suggests that Brexit-related projects will create more than 5,000 jobs in an accelerating economy.

Although Mr Mangan heard stories of "horror" in the bustling Dublin real estate market, he and his wife managed to buy a house after six months. "It took time but nothing crazy," he said.

Dozens of companies have made Dublin their hub of the EU while the UK is preparing to leave the block, which shows no signs of slowing down.

The EY accounting firm has announced that 28 financial services groups have committed to transferring staff or operations to Dublin since the 2016 referendum. Among them, Citigroup, Bank of America, Barclays, Legal & General and Axa.

More than 100 companies have sought permission from the Central Bank of Ireland to operate in the country. According to IDA Ireland, 70 new investments are directly related to Brexit, many of which do not belong to the financial sector.

However, John McCartney, director of research at Realtors Savills Ireland, said that many companies are settling in Dublin with only small teams. "They discover the city, see how the land is. . . If the need actually feels, they will be able to move up a gear, "he said.

William Tighe, director of Dwellworks, a specialized international relocation agency, has announced a "sustained increase" in business due to Brexit, adding that the rise in the number of "relocations that could lead to action" has been noted by the thousands .

Places are scarce in Irish public schools, leaving many people turning to paying institutions. "We are seeing more and more internships in private schools and international schools as a result of the arrival of these transferred people," Tighe said.

Rents are expensive, in the most exclusive suburbs of Dublin, on par with London or Paris. But the soaring prices of real estate that settled after the crash has eased. House prices rose 5.6% from the year to January, falling 11.8% in the previous 12 months.

Mr Mangan is happy to be back in Dublin, saying that non-Irish colleagues who have moved there are "generally very pleasantly surprised" by "his dynamism and dynamism".

Arthur Beesley in Dublin

Amsterdam

For Harm Bots, new head of the expanded office of the Royal Bank of Scotland in Amsterdam, one of the best badets of the Dutch city is its proximity to London.

"I can get up in Amsterdam to take the 7-hour flight to London City and still be in the office at 8 am, sometimes beating my colleagues to London," said Bots, who recently returned to London. the city that he left. 14 years ago, after stays in Tokyo, Kuala Lumpur and London.

Bots, who heads RBS's Dutch subsidiary, NatWest Markets NV, is one of hundreds of bankers leaving the UK to work in new European entities, which were created to allow banks to continue serving the region after Brexit.

Many of those who left the United Kingdom in the first wave of departures resemble Mr. Bots: foreign nationals from Europe returning to their home country.

The RBS executive, who has lived in London for seven years until November, said he would miss his world-clbad culture. "I love London. It's a fast city, and when I think about events and shows, it's great, "he said. "But the good news is that I'm still there often. And the family can go back to see his friends.

The prime location of Amsterdam and its conveniently located international airport, a seven-minute train ride from the financial center, is one of its main badets, allowing it to easily connect to other financial centers such as Frankfurt, Madrid and Paris. .

Despite its benefits, including the fact that English is widely spoken, Amsterdam should not become a hub for investment banking. One of the factors that holds it back is the rule that limits bankers' premiums to 20% of fixed wages, one-tenth of what others earn elsewhere in the EU.

Nevertheless, several trading groups, including CBOE Europe and the Turquoise platform of the London Stock Exchange, have chosen Amsterdam as a hub after Brexit, similar to the Japanese MUFG bank.

Their expansion threatens to fuel inflation in soaring prices for real estate. In 2017, the city was added to the UBS global housing bubble index and is now ranked seventh after London and New York for the average price ratio of real estate / income.

The municipality of Amsterdam has responded by proposing to ban new homes financed by mortgages "for rent", intended for owners wishing to rent apartments on sites such as Airbnb. But the measure also threatens to limit the supply of housing for workers who settle in Amsterdam.

"The city is relatively full, we are talking about a tourist tax," said Clifford Abrahams, chief financial officer of ABN Amro. "The housing market is already tense and people are worried that their children will climb the housing ladder," he added.

David Crow in London

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Davide Serra, founder of a $ 12 billion London-based investment company, is one of the most prominent returnees in Milan since the UK decided to leave the country. EU.

Aged 48, he left Milan at the age of 22 after winning a place in the Warburg UK graduate trainee program. He has never looked back. That is to say until the Brexit occurs.

"I have emergency plans," Serra said. "I can move anyone in any major jurisdiction, depending on what Brexit turns out to be. I hope the best but I am prepared for the worst.

He said his decision to move from London to Milan with his wife and four children was personal. For the moment, his company Algebris, specialized in investment banking and realizing a third of sales of Italian customers, remains anchored in London with offices in New York, Milan, Luxembourg and Singapore.

Significant tax breaks offered by the former Renzi government, of which Mr Serra was a fervent financial supporter, attracted many Italian financiers from London.

Mr Serra said that a tax break was not his main motivation. Instead, he feared that he and his wife with their British pbadports and their English-born and English-born children might find themselves "cut off" from Britain and "have more difficulty working throughout the country." Europe in the future "because of Brexit.

"I want to make sure that my children are fully bicultural and not just bilingual," he said. "London is the best city in the world – I am convinced that London will prevail and that London will defend itself – but I have also realized that London would no longer be what it was."

Italy has changed since leaving. "Milan has become the true Italian capital," he said. The northern city "gray, dark, dirty and dangerous", he recalls, has been transformed since the organization of the World Fair in 2015.

Qatari and Chinese money has poured into real estate development, the number of tourists is greater than that of Rome, new international schools have opened their doors and attract British teachers with higher salaries in euros. Crucially, it has also become the "gateway city" of the Italian economy focused on exports to access Europe and the world.

Mr. Serra said that this had two advantages: "At the entrepreneurial level, I am more in touch with the real economy than in London, and there is also a growing Italian community that felt bad about it. Happy with the Brexiters and who came to Milan. " Overall, the backtracking "was very enjoyable," he said.

Yet he did not turn his back on the UK. Last year, he set up a forum on politics and research, bringing together former German Foreign Minister Sigmar Gabriel, former Danish Prime Minister Helle Thorning-Schmidt and Mr Renzi to debate and promote the values ​​of the EU. The first two debates took place in Milan and London.

Rachel Sanderson in Milan

Madrid

Sebastián Albella, head of securities regulation in Spain, has formulated a number of theories as to why the number of bankers moving to Madrid after Brexit has been below expectations.

He questioned the feeling of instability caused by the conflict in Catalonia and the absence of tax breaks for companies such as those used by other countries to attract international banks seeking to set up new European hubs.

Nevertheless, he said that "the game is not over yet," pointing to the arrival of Credit Suisse bankers and a number of smaller institutions.

Credit Suisse is expected to transfer around 250 people to Madrid, the largest influx of bankers in the Spanish capital, as the Swiss bank creates a center for investment banking services at its main continental European base in Frankfurt.

Matthew Taylor, director of King's College in Madrid, said the English-language school received many more inquiries, "especially since Christmas," from people with finance backgrounds involved in emergency planning. . He added that more and more banks and multinationals were wondering if the school had room for students.

The impact is so far limited, however, about 10 new students have left the UK for Brexit reasons. "People who move from Venezuela have as much, if not more, an interest," he added.

Those who move to Madrid will find a booming real estate market, with prices higher than when the bubble burst during the 2008 financial crisis. Sales prices rose 17.2% in Madrid by January , according to Beatriz Toribio, head of research at the Fotocasa real estate portal.

"We have seen annual increases of more than 15 percent in the central and privileged districts since late 2017," she said. "Madrid is going very fast, both in rental price and selling price."

Prices rose in both rich and poor areas, selling prices for apartments jumped 13.4% in Salamanca well healed and more than 10% in the suburbs near Las Rozas and Majadahonda.

Home sales to UK buyers fell in 2017, a year after the Brexit vote, but rebounded in 2018 as the release date drew closer. British buyers accounted for 10,722 transactions in 2018, accounting for nearly 15% of sales to foreign buyers, the largest share of the market.

Most of them were destined for second homes, but some 2,500 were intended for people who settled in Spain for professional reasons, said Patricio Palomar Murillo, head of alternative investments at AIRE Partners. . "What we are seeing is mainly the arrival of leaders, not of less qualified people who have to move in," Palomar said.

Ian Mount in Madrid