Goldman London bankers queuing up for new jobs in Milan

Do continental European bankers in London really want to work in the "City," or were they only ever in London for lack of alternatives? As the opportunity to work back home becomes available, London's appeal is fast diminishing.

Goldman Sachs said last week that it plans to increase the number of investment bankers in its Milan office by 400% - from 20 to over 100 people. At the same time, there are reportedly plans afoot to move up to 40 'senior bankers' out of Goldman Sachs' London office and into Milan, Frankfurt, Paris, Madrid and Stockholm.

For Goldman Sachs, this represents a move away from the low cost "hub and spoke" model that evolved since the mid-2000s. For individual bankers at the firm, it represents a rare chance to move back home; many are understandably eager to make the most of it.

"You're going to see a lot of people moving to Milan between February 2018 (post-bonuses) and September 2018 (when schools start)," says one Italian managing director. "Then, there will be another wave in the first quarter of 2019, depending upon how Brexit negotiations go."

It's still early days for Goldman's plans, but first movers are expected to be managing directors and vice presidents. If junior bankers move out of London at all, they will do so later - unless of course the firm simply hires in local graduates, potentially rendering some of its existing French, German, Spanish or Italian analysts and associates in London surplus to requirement.  Italian juniors at Goldman Sachs in London are already voicing disappointment: "A good portion of us would like to move home," says one Italian IBD analyst at the firm.

In the 1990s U.S. banks like Goldman had staff dispersed across Europe. This changed under the hub and spoke model introduced after the lean years at the start of the 2000s, since which time headcount in overseas offices has been kept to a bare minimum. Goldman's Paris office, for example, is currently understood to contain no more than 30 investment bankers. The small Paris team can originate and execute deals alone if necessary, but it often has help from pan-European sector teams in London.

European offices are due to be staffed-up under Goldman's plan to chase mid-market deals using "local bankers for local clients."  Last month's comments by co-head of investment banking John Waldron, imply that large deals will still be originated and executed in London in future, but that contact with 'small firms' (with market caps of between $1bn and $5bn) will be pushed to local offices.

Senior European bankers in London seem eager to seize the opportunity this presents to go home. "People want to move to Milan to make the most of the non-dom tax breaks that were introduced by the Italian government earlier this year," says the Italian MD. These exempt people from living in Italy for more than half of each year from paying income tax on overseas income in return for a single payment of €100k. The implication is that Goldman's senior Milanese bankers will be paid offshore. Some say they will keep their families in London and work in Italy part time.

Not all Italian finance professionals are convinced of the merits of moving home, however. One Italian private equity professional who's setting up a new fund in London said the tax allowances will only really apply to retired non-doms and that the Italian government's tax promises aren't to be trusted anyway: "In Italy, governments will say these things and then go back on them and demand money in restitution. It's very difficult to plan long term." Until now, he says this wasn't the case in London: "The UK was a pragmatic and stable country." However, he notes that this historic pragmatism is being replaced by ideological extremes: "This is the real fear for Italians working in London now."

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