Brexit will cause London to lose €800bn to Frankfurt, lobby group predicts

Some 10,000 jobs also set to relocate to German financial hub as banks prepare for UK’s departure from EU

London is set to lose €800bn (£711bn) worth of assets to Frankfurt as financial institutions move operations to the EU in preparation for Brexit, a lobby group for the German city estimates.

Some 30 firms have chosen Germany’s financial hub as their new European base, to ensure they can serve all clients after the UK leaves the EU in March 2019.

Frankfurt Main Finance estimates the true figure to be 37, as a number of City heavyweights including JPMorgan, Goldman Sachs and Morgan Stanley plan to use multiple European centres.

This will result in up to €800bn worth of assets and around 10,000 jobs draining from the Square Mile to Frankfurt, the lobby group estimates.

“The path is now set for the financial institutions. The Brexit plans are being implemented,” said Hubertus Vath, managing director of Frankfurt Main Finance.

“All in all, we expect a transfer of €750bn to €800bn in assets from London to Frankfurt, the majority of which will be transferred in the first quarter of 2019.”

Mr Vath predicted more capital will eventually flow to Germany as the post-Brexit landscape for financial services becomes clearer.

“As it currently stands, banks face the decision of either relocating only what is absolutely necessary, or preparing for the relocation of their entire business,” he added.

“As long as uncertainty persists, most institutions are likely to prefer the minimum solution. In any case, it is clear that considerable second-round effects will follow.”

Additional jobs could move from London to Germany during the proposed extended transition period, Frankfurt Main Finance predicts.

It follows a move by German politicians to win more business by easing what are perceived as restrictive labour laws, by introducing a bill to relax protection from dismissal for senior bankers. The legislation is working its way through the German parliament.

Financial firms in London currently enjoy “passporting” rights which allow them to sell services across the 28 EU member states while being regulated only in the UK.

That option will not be available after Brexit, with firms instead hoping to rely on “equivalence”, which means the EU sees UK regulation as close enough to its own.

But without a comprehensive trade deal in place, firms risk having no fallback option in place, leaving them little option but to prepare for the worst by moving staff.