Existing attractiveness coupled with the protracted Brexit process has led Frankfurt Rhine Main (FRM), like many other regions across the EU, to jump at the chance to attract foreign companies hoping to circumvent the uncertain future relationship between the EU and the UK. Nowhere is this more the case than in financial services, due to concerns at banks, insurers and asset managers in the UK about their ability to do business in the EU post-Brexit.

“We have been targeting companies in the financial services sector amid ongoing Brexit uncertainty, and have done fairly well from the first round of announcements of where potential regional headquarters or financial institutions will locate post-Brexit,” says Eric Menges, chief executive of international marketing for the FRM region.

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From the 332 firms in the UK banking and finance sector that have relocated as a result of Brexit, Frankfurt has attracted 45 separate relocations, according to research by capital markets think tank New Financial. Despite this success other locations have been even greater benefactors from the exodus from the UK financial services sector, with Dublin attracting 115 firms, followed by Luxembourg (71) and Paris (69).  

“While the headline number of firms choosing Frankfurt for their Brexit-related relocation are lower than other financial centres, many of the firms moving something to Frankfurt are larger firms, particularly large banks and investment banks,” says William Wright, managing director of New Financial.

Despite the city’s success in attracting banking activity, Mr Wright finds it “striking how few firms in other sectors outside banking and markets have chosen Frankfurt” and admits that Paris is likely to attract more jobs. London is also likely to maintain its dominance as a global financial centre in the near future due to most senior bankers being reluctant to leave, reports Thomson Reuters

Nonetheless, Frankfurt has still attracted 70 greenfield FDI projects worth $770m in the financial services sector since the Brexit referendum in June 2016, a 245% increase in greenfield investment compared with the corresponding period before the referendum, reports fDi Markets, a data service from the Financial Times.

Mr Wright believes Frankfurt will evolve as a financial centre due to its position as the largest banking centre in Europe’s largest economy, and the presence of essential institutions such as the European Central Bank alongside European and German regulators.

“There is also talent from a number of well-known and renowned universities within the region which have a strong focus on legal and financial services,” says Mr Menges.

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Yet Mr Menges admits that Frankfurt’s ecosystem is smaller than that of London, a view corroborated by industry professionals: “While Frankfurt has a great financial centre, there is not the same kind of technology ecosystem that you find in London,” says Eileen Burbridge, partner at London-based venture capital firm Passion Capital. “German digital and tech innovation is centred in Berlin.” 

Despite this, Frankfurt’s tech ecosystem has had recent FDI success. In 2017 and 2018 the city attracted 26 and 29 greenfield FDI projects in the software and IT services sector, respectively, surpassing the historical average of 14 projects per year, according to fDi Markets.

Beyond the city however, the FRM region – which spans the area within a 30-minute radius of Frankfurt Airport across federal state borders – boasts major software companies, such as Software AG and SAP. Mr Menges stresses this is both a sign of the strong IT industry base in the region and how various regional authorities “have invested heavily to provide state of the art IT infrastructure to their existing industry base”.

Europe’s largest internet exchange point, the DE-CIX, is based in Frankfurt, giving the region a geographical advantage over peers vying for foreign companies trying to set up data centres. “We have seen unusual growth over the past two to three years in the data centre and data storage business,” says Mr Menges. 

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