Frankfurt and Brussels are emerging as tempting alternatives to London as European financial hubs in part because they have cheaper accommodation costs than Paris.
The British and French capitals are the most expensive cities for housing employees, costing businesses an average of €85,000 (£74,000) and €72,000 per worker per year respectively in residential and office rent. The research by upmarket estate agent Savills was released as Theresa May launched the two-year countdown to Britain’s departure from the EU.
According to the survey of 12 cities, the London and Paris costs are nearly double the accommodation costs in Milan, Dublin, Amsterdam, Moscow and Brussels. And residential costs are the heaviest burden, with domestic rents on average costing five times more than leasing office space across the 12 cities. This puts pressure on companies to pay higher salaries to cover rents and retain staff.
Frankfurt was found to be 65% cheaper overall than London, at an average annual cost of €29,748 per worker – comprised of a residential cost of €22,151 and €7,597 in office costs. Of the major European cities in the study, only Berlin and Warsaw are cheaper, costing firms €27,456 and €22,204 a year respectively. Many tech start-ups are already taking advantage of these low costs, and Berlin’s senate has written to hundreds of small firms in London in a bid poach them.
Madrid is another low-cost option for businesses looking to relocate staff, at an annual cost of €31,488, with the added bonus of more sunshine hours.
Dublin, on the other hand, was ranked as the fourth most expensive city, costing firms €45,219 per worker per year. But relocating to Ireland offers other advantages, as it has one of the lowest corporation tax rates in the EU, of 12.5%.
The Savills report suggests no single city will take London’s crown as Europe’s financial centre. For instance, Goldman Sachs is to relocate hundreds of bankers to Frankfurt and Paris, while HSBC wants to move 1,000 investment bankers to Paris.
Yolande Barnes, head of Savills world research, said: “Both Dublin and Amsterdam are small but high-profile cities with established global business centres offering a high quality of living. They are very attractive to the European and global workforce. Although workplace costs are favourable in these cities, the cost of homes in them will mean that employers are likely to feel pressure in the form of wage demands or any housing allowances.”
She added that cities with cheaper housing were more attractive for young professionals. “Importantly, cities like Warsaw and Berlin offer cheaper housing markets and are therefore particularly attractive to young people with limited equity seeking to put down roots and form families in stable communities. Due to the very high cost of accommodation, it is ever more difficult for young workers in the megacities of London and Paris to buy into the housing market.”