Frankfurt is the winner of the race post-Brexit

Frankfurt is emerging as the frontrunner in the battle for the post-Brexit spoils, as the German city lures banks and jobs out of London amid uncertainty over divorce talks.

After months of stalled negotiations in Brussels between Britain and the EU left London’s future shakier than ever, a growing number of banks are stepping up their contingency plans by leasing office space in other European cities.

While rival hubs have jostled to attract London’s bankers, Frankfurt – the city known by locals as Mainhattan, indicating its dreams of financial stardom – has established a clear edge over competitors such as Paris, Dublin and Amsterdam.

In one of the biggest wins for the German city, Goldman Sachs revealed last week that it is leasing 10,000 square metres of office space in a new Frankfurt skyscraper to boost its preparations for Brexit.

The new offices, under construction in the heart of the financial centre, will have space for 1,000 staff, allowing Goldman Sachs to increase its number of employees in Germany fivefold. A spokesman said the expansion will provide the company “the space to execute on our Brexit contingency plan”.

Rival US investment bank, Morgan Stanley, has also picked Frankfurt as its new trading headquarters inside the EU after Brexit. According to the Frankfurter Allgemeine Zeitung, it has secured 8,000 square metres of office space in the city’s new, 45-storey building, the Omniturm, which is also currently under development.

The move is expected to double the bank’s workforce in Frankfurt, which currently stands at 200. It is applying for a licence with the local German regulator that will allow it to continue trading across the EU after Britain leaves the bloc.

Banks including Standard Chartered, Japan's Daiwa and Sumitomo Mitsui Financial Group, as well as Woori Bank – one of South Korea’s largest lenders – have all confirmed plans for subsidiaries in Frankfurt.

Others, such as JP Morgan, will anchor their EU operations in a range of cities after Brexit, with staff spread across offices in Dublin, Frankfurt and Luxembourg.

It comes as banks become increasingly nervous about the prospect of a hard Brexit, which will see the UK lose access to the single market for financial services.

The fifth round of negotiations between Britain and the EU gets under way in Brussels this week. So far, the two sides have failed to see eye-to-eye on many of the key issues at stake – including the rights of EU citizens, and the so-called ‘divorce bill’ payable by the UK to Brussels – which increases the risk of the UK crashing out of the union without a deal.

It is this concern that has prompted many to seek a foothold in other EU member states such as Germany.

Top officials, from Germany's finance minister, Wolfgang Schaeuble to chancellor Angela Merkel, have courted banks since the Brexit vote. Ms Merkel claimed Frankfurt was “predestined” to host the European banking supervisor, which must move away from London after Brexit, because “we already have a proper centre”.

Estimates differ for the number of bankers set to flood into Frankfurt after Britain leaves the EU. A study by lobby group Frankfurt Main Finance in August suggested the region could gain as many as 100,000 jobs from Brexit over the next four years.

The report said the city could gain 10,000 new banking jobs and an extra 88,000 jobs in other sectors in Frankfurt and the surrounding Rhine-Main region.

Banks including Goldman Sachs have urged the UK government to negotiate a transitional deal with the EU as soon as possible, to reassure financial services firms and stop an exodus of jobs from London.

Britain's prime minister Theresa May has pledged to secure a two-year transition period after the UK leaves the bloc in March 2019. But a top Bank of England official last week said such a deal would probably need to be agreed by the end of the year to prevent banks moving abroad.

“If we get to Christmas and the negotiations have not reached any agreement on this topic, diminishing marginal returns will kick in,” said Sam Woods, the chief executive of the Prudential Regulation Authority. “Firms would start discounting the likelihood of a transition in the central case of their planning.”

Although some politicians in Britain are skeptical banks will follow through by moving large numbers of jobs, bankers in the City of London financial hub see an urgent need to act.

Once Britain leaves the EU, banks in London could find it harder to do business within the bloc, prompting many to seek a foothold such as Frankfurt.