Doing business in Frankfurt

Frankfurt skyline to illustrate doing business in Frankfurt

The German finance hub is touted as the city to lure bankers from Brexit Britain. But whether at London’s expense or not, its trade environment is creating opportunity for UK business. Leaders and experts discuss doing business in Frankfurt

When skyscrapers started springing up on the banks of Frankfurt’s Main river, locals mocked the city’s seemingly naïve bluster with the sardonic nickname ‘Mainhattan’. How could this provincial city in west-central Germany compete with Wall Street, with its sky-high stocks and greed-is-good ethos?

Forty years on, Mainhattan’s no longer a laughing matter, but a source of civic pride. Today, this glass-and-steel business district houses 155 foreign banks and one of the world’s largest stock exchanges, with the European Central Bank’s shiny new HQ just down the road. Until the Shard glinted into view, Mainhattan also had the EU’s tallest building, the 259m Commerzbank Tower, complete with a glass-walled toilet in its apex allowing, it is said, staff to imagine they are taking a tinkle on rivals below.

Some pessimistic post-referendum predictions suggest Frankfurt is set to continue its rise, but at London’s expense. Last summer a Boston Consulting Group survey found Frankfurt better placed than rivals Paris and Dublin to take up the 20 per cent of financial services jobs it estimated London would lose on leaving the single market. Factors included Germany’s economic stability and highly qualified talent, reasons not lost on Swiss bank UBS, which set up a new subsidiary (it suggested 1,000 London jobs would also move) or Goldman Sachs, which recently announced it was taking extra office space there.

If the mooted ‘Brexodus’ does happen, financial consultant Nick Jefcoat – who has spent 23 years working in banks in Frankfurt, including as managing director at Bank of America Merrill Lynch – envisages UK firms will increasingly find “opportunities in supporting industries such as law, accounting and, when corporate finance boutiques spring up, printing, publishing, IT…” 

But being the UK’s economic gateway to the eurozone is something Frankfurt never wanted. According to Neville Anderson, senior manager at PwC and co-chairman of the British Chamber of Commerce in Germany, Rhine-Main: “The overwhelming mood [in Frankfurt] was that Brexit wasn’t a good idea. But now, the feeling is there’s no point harping on about it, let’s try and make the best of it.”

Frankfurt’s status has been boosted by key regulators European Central Bank and the European Insurance and Occupational Pensions Authority being headquartered there. Having such financial behemoths on your doorstep can be beneficial for fledgling ventures too, says British entrepreneur Tom Acland, co-founder of COBI smart-biking system (see case study, below): “You notice it more indirectly – finding angel investors is much easier than elsewhere in Germany.”

Despite the column inches lavished on the city’s ambitions, Jefcoat is keen to downplay the post-Brexit ‘Bankfurt’ frenzy. “In September last year, people were talking about 20,000 bankers coming [over from the UK] in the next two to three years,” he says. “We don’t know what’s going to happen in terms of trade agreements, but I think the City will remain strong – it will probably lose some jobs, but not [that soon]. I predict Frankfurt will get some jobs but definitely not tens of thousands.” Indeed, finance minister Wolfgang Schäuble said in March: “It’s in our own interests to have a strong financial centre in London.”

Like London, Frankfurt faces competition from Paris (which has been attempting to woo banks by reducing its corporation tax), Dublin and Luxembourg. “There’s also a worry business will leave Europe completely,” says Anderson. But there’s more to Frankfurt than stocks and shares, and that’s where opportunities for UK firms arise. It has a desirable location, slap-bang in the geographical heart of Europe. The city is concatenated by traffic arteries, criss-crossing the entire continent with big-league cities such as Paris, Brussels and Zurich less than five hours’ drive away. Meanwhile, Frankfurt airport sees itself as mainland Europe’s major aviation hub (and the continent’s largest cargo airport) and boasts an impressive 12-minutes-to-downtown transport link.

Bankers looking at computers to illustrate doing business in Frankfurt

Frankfurt stock exchange Deutsche Börse

Data centre

With 35 per cent of Europe’s internet traffic running through it, Frankfurt is also the world’s largest data hub. “There’s no place on this planet where you have more data and sophisticated infrastructure,” Johannes Schäfer, project director at Frankfurt Economic Development, says. It partially explains why the surrounding Frankfurt Rhine-Main region hosts a flourishing ICT and fintech sector – British tech firms Colt and Sage have offices there – working with international banks and spotting opportunities in big data, cloud computing and cyber security.

Having been a mercantile hub since the 12th century, Frankfurt also hosts a phalanx of trade shows, ranging from the world’s biggest book fair and motoring show to Dental Information Day. Businesspeople also rhapsodise about the region’s talent pool. Frankfurt Rhine-Main has five universities (some 200,000 students) with a strong Stem focus. “Our product is quite complicated but one of the great things about having Frankfurt as a base is you’ve got lots of manufacturing/engineering expertise,” says Acland. “In the UK, you’ll pick up people straight from university and expect them to be pretty fresh and need some training. With German graduates, you’ll find they are very capable of managing and taking responsibility. Understanding the way education and work intermingle here is key to building your personnel.”

Germany’s education system is much lauded for its vocational bent, with six-month praktikum internships embedded into many degree courses (Jefcoat: “You’ll find many graduates with five internships under their belt by the age of 23”). “Careers are determined earlier here,” says Anderson. “Having a general university degree isn’t really the idea. People tend to enter the industry they’ve trained for.” Despite this, compared with Berlin, Frankfurt makes an unlikely poster child for Europe’s strongest economy (Germany’s GDP is currently $3.5trn (£2.8trn)). Public opinion paints this city of around 700,000 people as somewhat drab, full of bad food and number-crunching workers. Even state officials have described it as a “love-at-second-sight” city. So why would London’s financial talent want to up sticks and head there?

“Frankfurt has a terrible image,” admits Jefcoat. “Before I came here, I was offered posts in London and Hong Kong. My friends couldn’t believe I came here… If you are a 22-year-old foreign exchange trader, then maybe Berlin is the more interesting place. But Frankfurt fights well above its weight – the quality of life is huge.”

Indeed, Frankfurt recently placed seventh on Mercer’s Quality of Living survey (London languished at 40), with foreign residents such as Jefcoat praising the city’s short commuting distances, wealth of museums and international schools, superb transport links, gemütlich (Germany’s hygge), bierkellers, plus proximity to forests and vineyards. But should British businesspeople migrate there, in future they could face being non-EU citizens in EU territory. “If there’s no agreement on pensions and health, anyone from London thinking about coming to Frankfurt would need to think long and hard about tackling them,” warns Jefcoat.

Persuading staff to move isn’t the only problem British firms might face. Another potential stumbling block is Germany’s labour laws, with the country’s minimum statutory redundancy being significantly more generous than the UK’s. Although the state of Hesse, in which Frankfurt sits, is looking to address this (a special zone in Frankfurt which adheres to UK employment law has been suggested), complex German tax is also a botheration. “Tax in Germany is astonishingly complicated,” says Jefcoat. “That’s why you have battalions of tax advisers here – millions of them, all making a good living.”

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Business friendly

Germany does have numerous attractive schemes, such as kurzarbeit (‘short time’). Set up by ex-chancellor Gerhard Schröder as part of Agenda 2010 reforms, it lets companies cut workers’ hours with the government making up some of the lost wages, allowing firms to retain skilled employees. “It’s quite valuable for companies if they have a quiet patch,” says Acland, while Schäfer notes, “it’s reduced some of the social security regulations you find in the workplace and made workforces better motivated.”

German industry is propped up by the Mittelstand, the often family-owned SMEs which comprise 99 per cent of companies. Some practices – such as employee reps on boards – have been hurrahed by British leaders (including, initially, Theresa May). “It leads to a more consensual approach in disputes,” says Anderson.

But German firms seem to lack a knack for self-promotion, which may be why Frankfurt has been relatively understated in pushing for post-Brexit business (unlike Paris, which plastered “Tired of the fog? Try the frogs!” posters across Eurostar last summer). Frankfurt’s role in the future EU will be affected by the nature of the UK’s departure. A hard Brexit – where British banks lose so-called ‘passporting’ rights and single market access – might work in its favour. But the floundering of a proposed £24bn merger between the London Stock Exchange and Deutsche Börse (its German counterpart) – which could have seen London derivatives moved to Germany – indicates there is some way to go.

Fifteen years ago, Germany  endured “sick man of Europe” headlines. But nobody should write it or Frankfurt off. As her 12-year tenure (odds-on to be extended in September’s elections) has shown, Merkel’s Germany is a protean country. As Acland says: “Often discussions about Germany are led by traditions that are going back decades. But Germany is much more dynamic than that. Things change here quicker than people think…” Whether Frankfurt prospers at London’s expense or not, it is clear there will be opportunities for fleet-footed UK firms in a city increasingly eager to be loved at first glance.

A cyclist's point of view

COBI bike dashboard


Tom Acland who talks about doing business in Frankfurt

Tom Acland co-founder of COBI

Fiddling with your smartphone while cycling is a bugbear of many a Wiggo wannabe. Aiming to solve it is COBI, a smart-biking system which turns your phone into an integrated hands-free dashboard, with intelligent features such as voice guidance and brake lights operated by mounting the phone into the system. Co-founded by British entrepreneur Tom Acland in 2014, COBI was initially funded by angel investors, followed by €400,000 (then £292,000) raised via a Kickstarter campaign, and venture capital in spring 2015. With the product designed in Germany but made in China, Acland believes the biggest initial challenge was “managing the complexity of so many different suppliers – we’ve got people working on electronics, others working on plastics and software”.

Having worked in Frankfurt since 2003, Acland is well versed in Germany’s often arcane bureaucracy. “If you’ve never set up a company here before, the red tape can be daunting, but it’s hardly byzantine.” COBI started shipping in September via its website and Amazon, with Acland estimating thousands of current users worldwide. The company has scaled too, increasing staff numbers from 10 to 40. The rise of e-bikes (particularly in Holland, where almost half of all new bikes are now battery-powered) has aided their fortunes. With COBI planning to launch in the UK later this year (the firm is currently looking for distributors), Acland believes Frankfurt was ideal for its development. “We’re close to Holland, a fantastic airport, plus freedom of movement across Europe. In terms of the industry and mobility factor, Frankfurt couldn’t be better.”


Doing business in Frankfurt: Useful links

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About author

Christian Koch

Christian Koch

Alongside his work for Director, Christian has written features for the Evening Standard, The Guardian, Sunday Times Style, The Independent, Q, Cosmopolitan, Stylist, ShortList and Glamour in an eclectic career which has seen him interview everybody from Mariah Carey to Michael Douglas through to Richard Branson with newspaper assignments including reporting on the Japanese tsunami and living with an Italian cult.

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