Look out London: Budapest, Prague, Wroclaw want your workers

As London braces for a post-Brexit exodus, banking talent gets set to move east

Following years of brain drain in which elite graduates fled ex-communist nations for higher paying jobs in the West, Eastern Europe now has more to offer. (Photograph: Kacper Pempel/Reuters)

Following years of brain drain in which elite graduates fled ex-communist nations for higher paying jobs in the West, Eastern Europe now has more to offer. (Photograph: Kacper Pempel/Reuters)

 

When the world’s largest asset manager announced it was setting up a global hub in Budapest this year, it was inundated by applicants from an unlikely place: London.

Those interested in leaving Europe’s top banking center for the Hungarian capital made up a third of aspirants, said Melanie Seymour, managing director in Budapest for BlackRock, which manages more than $5 trillion.

Senior investment bankers and other top-earning Hungarians flocked to the company’s get-together in the City to hear about the 500 marketing, financial-modeling and other positions. As London braces for a post-Brexit talent exodus, central and eastern Europe is preparing for the opposite.

Following years of brain drain in which elite graduates fled ex-communist nations for higher paying jobs in the West, the region now has more to offer. Companies including Goldman Sachs Group in Poland and Pfizer in the Czech Republic will contribute to a more than tripling of the finance, legal, research, design and other posts in the region to one million by 2025, according to the Association of Business Service Leaders (ABSL).

“Their ultimate dream is to come home,” Seymour said. “The only reason they’re not here is because there aren’t the career opportunities to satisfy their intelligence and career ambitions.”

At the centre of the job boom are business-service hubs, where global companies do much of their heavy lifting in the European Union’s eastern wing. Initially focused on low-paying tasks such as call centres, the industry now employs highly-qualified and multilingual staff to take on jobs once only handled in companies’ headquarters.

Poland is leading the way. The EU’s largest eastern economy boasts 936 centres employing 212,000 people, which should grow to 300,000 by 2020, ABSL said. The government says it will lure as many as 30,000 British jobs this year as companies seek to keep their operations in the EU after Brexit.

Jobs pipeline

In financial services, UBS AG has a global hub in Krakow. Goldman Sachs, which is planning to halve its London staff to 3,000 workers, will expand in Warsaw to “several hundred” people over the next three years, Handelsblatt reported. JPMorgan Chase which may move as many as 2,500 jobs to central Europe, is also considering Poland.

The boom has boosted employment outside of traditional business hubs. Poland features 10 cities that employ at least 3,500 people in the sector, including Krakow, where Heineken NV has operations, and Wroclaw, which hosts Google. Brno, the second-largest Czech city, has offices for US-based AT andT, while Romania’s Cluj-Napoca has Hewlett Packard Enterprise.

Salary boost

Salaries have risen across the region as a result. Software developers with three to five years of experience, for example, make an average of €28,500 a year in Prague and €33,200 in Budapest.

That’s three times the Czech and Hungarian national averages but still less than the €65,000 a year they’d make in Dublin.

Although the service centre trend has burgeoned independently of Brexit, more than a quarter of UK employers suspect EU citizens on their staffs are considering leaving this year, according to a survey by the London-based Chartered Institute of Personnel and Development.

British companies are also considering moving, according to Jonathan Appleton, head of the Association of Business Service Leaders in Prague. “We’re already seeing” a spike in interest among UK companies who are looking to move out of Britain, said Appleton. “As things get more difficult, they will look at relocating.”

Still, higher western salaries continue to draw workers abroad, regardless of Brexit. While about one million Poles live in the UK, more Polish workers have moved to Germany than to Britain each year since 2012. The exodus of workers has created a labour shortage that’s hampering growth across the region, and the scarcity of skilled workers is now the top concern of chief executives in Hungary.

Hungarian wages jumped 10 per cent annually in January, the most in more than five years, after the government agreed with employers to aggressively boost salaries to try to dissuade people from emigrating. Business centres, at least, are helping raise productivity, which can keep record salary increases sustainable and keep some workers home.

Back in Budapest, General Electric plans to expand its service centre to more than 2,000 employees by the end of 2016, from 1,900, making it the biggest of four hubs along with one in Cincinnati, Ohio, the company said. BlackRock’s future financial modelers will join “one of the highest-skilled quant teams” in the company, Seymour said. “The work that happens there is both as important to the overall outcome of the firm and as complex as anything we do in London, New York, Hong Kong or Singapore,” she said. “We can hopefully help support keeping talent here as well as attracting some of it back.”

Bloomberg