Finance

Lionel Laurent is a Bloomberg Gadfly columnist covering finance and markets. He previously worked at Reuters and Forbes.

With Britain poised to leave the European Union, cities from Paris to Frankfurt want a slice of London's financial industry. Until Brexit is formally triggered, though, it's a good time for some overseas banks to add more staff in the U.K.

ING is doing just that, according to Bloomberg News. The Dutch lender plans to move as many as 60 trading jobs to London from Amsterdam and Brussels. That's not a huge number -- ING's current operation in the U.K. has about 140 staff -- and the lender gets most of its profits from consumer banking anyway.

Turning Around
Shares of ING have outperformed peers as the bank pursues a digital-focused overhaul
Source: Bloomberg

But it does show that London is still exerting its magnetic pull, if mainly for reasons of costs and efficiency rather than booming growth.

London's assets -- a global talent pool, ease of doing business and market share -- haven't changed much since June, except for the fact they're now a lot cheaper in foreign-currency terms. The pound has fallen to 1.11 against the euro from 1.36 since the end of 2015, offering an instant saving for a euro zone bank paying salaries and bonuses to Londoners.

True, the currency effect goes the other way when it comes to translating revenue in pounds back into euros, but for a bank like ING there's still an opportunity to to reduce costs.

The bank wants to reap about 900 million euros of cost reductions annually. Shifting some trading activities away from Brussels and Amsterdam would generate savings and simplify the operation, according to KBC analysts.

There's still the risk of a messy Brexit, which could see U.K. banks robbed of their passport into the single market. That regulatory uncertainty should be lessening the appeal of London, currently the top-ranked financial center in the world, according to the Z/Yen Global Financial Centers Index. 

So why would ING prioritize London over other cities like Brussels or Amsterdam? The answer is that the terms and consequences of Brexit are still a long way away -- but the pressure on costs and revenues is here today.

World's Leading Financial Centers
London is still preeminent in Europe, according to a report by Z/Yen Group
Source: Z/Yen Group, based on statistical data and a poll of finance professionals.

Paris and Frankfurt still need to relax their tax regimes and their labor laws to attract jobs. Ease of hiring and firing also matters, and London is more flexible in this regard. The number of bank employees in the U.K. fell by about 20 percent between 2007 and 2014, more than the 18 percent seen in the Netherlands and the paltry 3.2 percent seen in France, according to Bloomberg Intelligence. Regulators and unions matter: ING's own job-cut plans have sparked fierce opposition in Belgium, and labor unions intend to go on a prolonged strike, according to KBC.

None of this should be taken by die-hard Brexiteers as a sign Britain is set to flourish after Brexit. ING may turn out to be an exception. Global and U.S. heavyweights in London with tens of thousands of employees will have little appetite to hire more. But it is a sign London's fate as a financial center won't be as straightforward as immediate decline.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Lionel Laurent in London at llaurent2@bloomberg.net

To contact the editor responsible for this story:
Edward Evans at eevans3@bloomberg.net