Sunday 15 September 2019

Britain’s hold on private equity in doubt amid pay rises in Germany

Managing partners in German-based private equity firms earn around 115% of the UK total.

Mercer’s 2017 Cost of Living Survey
Mercer’s 2017 Cost of Living Survey

By Kalyeena Makortoff, Press Association City Reporter

Germany has overtaken the UK when it comes to compensating private equity professionals, raising further fears that Britain could lose its status as Europe’s financial services hub.

A report by executive search firm Heidrick & Struggles shows that mean cash compensation levels for partners and managing partners in German-based private equity firms are around 115% of the UK total.

Mean pay for associate level staff is also higher in Germany at 104% of British compensation.

“Germany has overtaken the United Kingdom as the most highly compensated market for managing partners/partners as geopolitical concerns over Brexit continue,” the report said.

The study measured and compared total compensation, including mean base pay and mean bonus pay for 2016, for private equity staff in 2016.

However, German-based principals still receive less than their London counterparts, bringing in only 89% of their total.

But higher pay packets abroad could mean private equity professionals may be more willing to relocate from London, which is set to suffer a post-Brexit exodus of banking, insurance and asset management jobs.

shaking hands

Rivals including Dublin and Frankfurt are already emerging as the main beneficiaries of a post-Brexit jobs boom, while the Heidrick & Struggles report suggests it would be easy for Germany to take the crown as Europe’s private equity epicentre.

“Germany is well positioned to become a new hub for private equity with its strong economy, healthy middle market, and perceived relative safety for capital deployment,” it noted.

It would add to a growing number of international banks including Standard Chartered which have committed to expanding or establishing offices in Germany in the wake of the EU referendum, assuming passporting rights for financial services are lost after Brexit.

Citigroup has notified its bankers of plans to bolster its Frankfurt office, creating 150 jobs, while the Press Association understands Morgan Stanley is on track to move as many as 200 staff.

Mizuho will join a raft of Japanese banks which have chosen the German financial centre as an EU hub, including Daiwa, Sumitomo Mitsui Financial Group (SMFG) and Nomura.

Germany’s own Deutsche Bank notified staff in July that it was likely to book the “vast majority” of its assets out of Frankfurt – where its headquarters are based – after the UK leaves the EU.

That is in addition to JP Morgan and Goldman Sachs, which are set to bolster operations in various EU cities including Frankfurt.

It is expected that the influx of financial services staff over the next four years will result in the creation of up to 87,667 new roles throughout the Rhein-Main Region, according to a report released in late August by lobby group Frankfurt Main Finance.

But France, which is also vying for business after Brexit, fell behind its European counterparts when it came to private equity pay.

Managing partners brought in only 65% of their UK counterparts’ compensation totals, while principals and associates received 94% and 95% respectively.

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