Research - MAY 9, 2017

Eurostat’s GDP numbers for Germany — where did Frankfurt go?

by Richard Fleming

I have just finished writing the lead story on southern Europe for the upcoming June 2017 issue of Institutional Real Estate Europe and did some research for that on GDP and GDP per capita numbers for Italy, Spain and Portugal, the countries that most people in real estate investing understand under the term “southern Europe” and that are the main focus of that story.

Helpfully, Eurostat, the statistical office of the European Union, has just published GDP and GDP per capita numbers for 2015. GDP per capita across the EU in that year was €28,900. In Italy it was €27,100 and in Spain it was €23,200, showing that the two countries were lagging behind. (On a purchasing power basis, the three numbers were €28,900, €27,800 and €25,900, respectively, throwing up some interesting questions but still showing the two countries as being behind the EU average.)

In common with most countries, the major cities are richer and have a higher GDP per capita than the country as a whole — Italy’s north-west region, covering Milan, for instance, has €33,300 and in Spain, Madrid has €31,700.

So far, so good. In passing, I also looked at the numbers for Europe’s other major economies and cities. As comparators, the GDP per capita of London was €67,500, against €39,600 for the United Kingdom as a whole. Paris’ was €54,600, against €32,800 for France.

Typically, decentralized Germany is less easy to gauge; overall GDP per capita was €37,100, with the federal states of Baden-Württemberg, Bavaria, Bremen and Hamburg outperforming at €42,800, €43,100, €47,500 and €61,700, respectively, and Berlin underperforming at €35,600.

Strangely, Frankfurt appears not to be listed in Eurostat’s Germany GDP per capita tables. Hesse, the federal state in which Frankfurt sits, is given and has a GDP per capita number of €43,000. Frankfurt is the largest city in the state but the state capital is Wiesbaden. The only breakdown for Hesse given in the Eurostat detail is by the three cities, also known as administrative provinces or Regierungsbezirke, of Darmstadt, Giessen and Kassel. Frankfurt appears to be included in the Darmstadt number of €48,800. If that’s the case, there will be a reason but I don’t know it. Maybe it’s just easier.

It would be good to know what Frankfurt’s GDP per capita number is. Those London-based banks that are reportedly considering Frankfurt for relocation of some functions and jobs post-Brexit — it is mainly the big U.S. investment banks that are taking the lead on this potential EU passport–driven evacuation — are probably asking themselves the same question, as part, perhaps, of their efforts to persuade key staff to move with the job. Someone who likes living and working in London might not like the prospect of living and working in Frankfurt. Notice I put living ahead of working, and so might others.

These things matter because there is a direct causal relationship between the location of work and the generation of GDP. Let’s take as a given that the provision of banking and financial services produces GDP in the first place. If substantial amounts of bank functions and large numbers of highly-paid jobs do relocate from London to Frankfurt, then the latter city’s GDP and GDP per capita numbers will go up — and London’s will go down.

Don’t ask me, though, ask Eurostat.'


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