London, April, 26, 2017 – Despite recent announcements by financial business service companies that following Brexit, they would move part of their company away from London, according to Colliers International’s Cities of Influence report, the UK’s capital remains the primary European location with the latent capacity and supporting infrastructure to grow and expand its occupier base, driven by both the size of the current skilled talent pool and new fresh candidates coming through universities.

In addition, as the research demonstrates, despite Paris having a similar capability to absorb these jobs, the city has strict labour laws, which has been a major driver of businesses location decisions in favour of London. 

“It has been several weeks since Theresa May pulled the trigger on Article 50 and it would already appear that some financial institutions are starting to make plans to relocate part of their business overseas. Shortly before this happened, Goldman Sachs declared that it would make contingency plans before Brexit’s plans are fully implemented. However, despite any initial real estate cost savings, relocation costs would offset this and in reality, no single city in Europe has the capacity to absorb any mass migration of jobs from London at short notice. Initial estimates quoting the potential re-allocation of up to 100,000 jobs seem very wide of the mark at present. A re-allocation of this scale would need to be distributed across a number of cities possessing the latent talent with financial banking services skills, and even then this could lead to labour cost hikes”, said Guy Douetil, Managing Director, EMEA Corporate Solutions.

“At present, the number of jobs reported to be considering moving from London are less than 10% of this figure. At the same time, we have seen re-affirmations of long-term interest in the UK capital from significant global businesses.”

Colliers’ Cities of Influence report features a ‘TLC’ index in which 20 major individual economic cities are ranked in terms of talent, location and cost. These factors have been categorised based on the size and orientation of economic output and the workforce; the capacity and skill-set of the latent and emerging talent pool; the cost and affordability of the city - as a place to live and save, and in terms of the cost of labour and total cost of office occupation; and finally the country risk associated with the market, and the inherent risk/challenges presented by labour laws. 

Here are some of the highlights:

  • Outside of the big two markets (London and Paris), Manchester, Stockholm and Dublin are the three cities which feature most highly at 3rd, 4th and 5th place, respectively.
  • Manchester jumps up the rankings to get into 3rd spot, having occupied 6th place until the country risk/labour market factors are accounted for. After the first stage: ‘Output and Orientation’, Manchester was as low as 17th, but the combination of high scores for its strong latent talent/future skills pool, high affordability and low cost combine to move the market up the rankings, which is good news for the Northern Powerhouse.
  • Stockholm comes in at number four, as a steady strong performer throughout all sectors. The current orientation of the economy and the skills/experience of the inherent workforce put the market at the forefront when it comes to building a digitally sophisticated economy.
  • Dublin also does very well, for very similar reasons. Strong English language skills and proficiency are also a clear advantage for these cities over other European locations, as are the more liberal, transparent labour markets in situ. Dublin actually has a higher English language proficiency ratio than multi-cultural London, second only to Manchester.
  • Madrid and Barcelona both have strong affordability/cost scores, and high latent talent pools, but suffer from a high country/labour market risk factor. This knocks Madrid from 3rd to 8th, and Barcelona from 7th to 16th.
  • Munich only hit the top five once but cost/affordability and future talent factors prevent it from staying in this position.
  • Most surprising is the continual low score of Berlin, but an examination of the workforce/economic orientation of the city highlights an over-dependence on the public sector, despite all the positive growth surrounding the development of tech, media and telecoms operators in the city.
  • Frankfurt suffers primarily from a lack of capacity, and being relatively expensive, compared to other European cities.
  • The bottom ranking markets features Milan, Budapest and Brussels. Both Brussels and Milan are hindered by high relative costs, and high country market risk. Brussels (Belgium) has the weakest score of all countries from a labour market regulation perspective, and post the Italian referendum, this position is not much better for Milan. The Budapest score is also hindered by high country risk, but limited economic output/market orientation and future skills/ capacity also play a role.

Damian Harrington, Director Head of EMEA Research at Colliers International adds:

“Looking forward, markets in Europe, and even those globally, face some unprecedented changes from a political and economic perspective. The new manifestos and policies of the US and UK governments are yet to become clear and ratified. In addition, Europe needs to negotiate with the UK over their eventual exit from the formal EU, and get through some key elections in France and Germany.

It will be interesting to measure the material impacts these changes have on the major European cities of influence we have analysed. Will France deregulate their labour laws, will the UK be stymied by a reduced influx of fresh talent, will Brussels and Berlin remain driven by public sector occupiers? All these factors would have a significant material impact on the future, relative attractiveness of one location over another resulting in a significant change in the city rankings.”