UBS Group Intends To Shift London Workforce On Brexit

Following Brexit, UBS Group AG (NYSE:UBS) is likely to relocate around 1500 of its London workforce to a European Union (EU) country. This was stated by the CEO, Sergio Ermotti, in an interview with Japanese newspaper Nikkei.

Though London serves as an important financial center and a gateway to the EU market for several global banks, Brexit is likely to lead the city lose its status.

Earlier in July, UBS’ investment bank head, Andrea Orcel, in a statement to Bloomberg warned that a “significant percentage of UBS's 5,000 London employees would likely have to move if the UK lost its passporting and euro clearing rights.” But he said the UBS would still have a base in the U.K.

The Brexit Impact

On Jun 23, 2016, Britain voted to exit the European Union. The referendum roiled the global markets, including currencies and stocks, causing the British pound to fall to its lowest level in decades. Further, stock markets across the globe tumbled.

UBS was also not untouched. Since Brexit vote, the company shares have declined 9.6% on NYSE, as of Sep 6, 2016.

Further, the referendum was a huge blow to the European project of forging greater unit. Post-Brexit, Britain would lose its passporting and euro clearing rights. Through passporting, banks can freely sell services and products across the EU, which is part of the negotiations between the U.K. and the trading bloc.

Global banks that use London to serve EU will be at a disadvantage, compared to the existing European lenders inside the trading bloc. They will have to face the long process of obtaining approval from local regulatory authorities for relocating their workforce.

UBS is one of the banks including Morgan Stanley (NYSE:MS) and JPMorgan Chase & Co. (NYSE:JPM) that are planning to shift their operations/workforce to continue providing services to EU countries if Brexit makes it impossible to run such services from London.

Currently, UBS Group AG carries a Zacks Rank #3 (Hold). Other better ranked stock in the same space is Banco Macro S.A. (NYSE:BMA) , sporting Zacks Rank #1 (Strong Buy).

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