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ECONOMY

Brexit bank relocations to Germany expected to create 2,500 jobs

Germany is the most popular EU destination for banks leaving London following Brexit, with financial institutions expected to move €675 billion in assets and create 2,500 jobs, the Bundesbank said Monday.

Brexit bank relocations to Germany expected to create 2,500 jobs
Photo: DPA

The German central bank expects lenders to transfer €397 billion more than the €278 billion it has already moved from Britain post-Brexit, it said in a study, as negotiations intensify surrounding the conditions for the UK's new relationship with the European Union.

The European Central Bank estimated in August 2019 that €1.3 trillion in assets would be transferred to the eurozone from Britain ahead of Brexit.

READ ALSO: How post-Brexit bank changes could affect British people in Germany

Britain left the 27-nation bloc at the end of January, but is currently negotiating its future relationship with the EU amid a transition period that ends on December 31st.

The spectre of a “cliff-edge” no-deal Brexit, which would add more obstacles to cross-border business, has risen in recent weeks as negotiations stalled over fair-trade rules and fishing rights, with EU Commission chief Ursula von der Leyen saying last week that talks were in a “critical phase”.

The Bundesbank study confirms banks' preference for Germany as a base for operations away from London, estimating a total of €675 billion in relocated assets.

By comparison, around €150 billion of assets will be moved to France by the end of the year, France's central bank governor said.

Sixty-four financial institutions have applied for banking licences in Germany, with 40 so far having been approved, and the remainder pending.

Financial institutions moving operations out of the City of London should boost bank workforces in Germany by as many as 2,500 positions.

US bank JP Morgan said in September it would shift some €200 billion from the square mile to Frankfurt, which would make it one of Germany's biggest lenders by assets.

The Bundesbank also said the financial sector was generally well prepared for Brexit, echoing ECB supervisory board chair Andrea Enria, who said that
banks are “now ready to take the hit, to some extent.”

READ ALSO: EU students turn to Germany as a top study destination in light of Brexit

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ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

READ ALSO:

With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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