Goldman Sachs’ Asset Shift to Frankfurt: Job Implications Post-Brexit

Financial institutions are constantly adapting to political and economic changes. The recent move of Goldman Sachs by transferring 60 billion worth of assets from London to Frankfurt has raised questions on the potential impact on employment. This article delves into the reasons behind this strategic decision and the possible job implications.

Contextual Background

London was a hub for global financial operations, significantly due to its position as an international financial center and open access to the European market. However, the United Kingdom's decision to leave the European Union has triggered a series of business strategies aimed at mitigating the economic impact of Brexit.

Primary Drivers for Asset Relocation

One of the key determinants for Goldman Sachs' decision to relocate asset management from London to Frankfurt is the potential for a no-deal Brexit scenario. Such a scenario could limit financial services firms' ability to conduct business across the EU, which necessitates a strategic realignment of operations to ensure continuity and compliance.

The Financial Landscape: A 1.7 Trillion Perspective

Goldman Sachs, a major player in the global financial market, held assets worth approximately 1.7 trillion in 2019. With the transfer of 60 billion from London to Frankfurt, the figures can be reevaluated as follows:

The total assets (1.7 trillion) minus the assets moved (60 billion) results in a remaining 1.64 trillion.

Although 60 billion is a significant amount, it represents only 4.5% of the total assets. Thus, the impact on the overall financial architecture is relatively minimal, underscoring the notion that this is a strategic move rather than a financial crisis for the institution.

Strategic Expansion in Frankfurt

Goldman Sachs signaled its commitment to this new European center as early as 2019 by expanding its team in Frankfurt. This move underscores the institution's long-term strategy to strengthen its presence in the EU market, positioning itself for both hard and soft Brexit outcomes.

Employment Implications for Frankfurt

While the relocation of assets from London may facilitate an expansion in Frankfurt, this does not necessarily translate directly into a surge of jobs. The decision to utilize the local talent pool in Frankfurt is a key consideration. Goldman Sachs may prefer to rely on a more experienced and localized workforce compared to the influx of external talent from London.

A concentrated effort to hire and train local candidates can strengthen the firm's ties with the local labor market and regulatory environment. Moreover, this approach can help adapt to regional economic conditions, reducing the dependencies that come with relying on expatriate labor.

Conclusion

The move of Goldman Sachs' asset management from London to Frankfurt is a strategic response to the uncertainties of Brexit. While the immediate financial impact is moderate, the long-term implications for Frankfurt and the broader European financial landscape are significant. The focus on local talent and strategic expansion underscore the institution's commitment to retaining its competitive edge in the dynamically changing global financial industry.