About eight months ago, former British foreign secretary Boris Johnson went overboard during a diplomatic gathering and used the expletive “f..k” business to express skepticism over anti-Brexiteers’ fears that the country’s economy would suffer after it exited the 28-nation bloc without an EU deal.
The hardliner pro-Brexit crusader resigned shortly after, but might still have to eat his words with the impact of Brexit on London’s vibrant financial sector now beginning to be acutely felt.
A UBS Group AG unit has just won judiciary approval to relocate some of its businesses offshore, becoming the latest multinational to join the ranks of businesses clamoring to pull the plug on their UK operations.
The Swiss bank has cited “external shocks” resulting from Britain’s exit from the EU and not the usual “internal rationalization” or “commercial advantage” on its way to convincing Judge Alastair Norris in London to allow it to shift assets valued at more than 32 billion euros ($36.5 billion) to Germany.
UBS’ goal is to keep its operations going amid the uncertainty about a post-Brexit future, including the nagging question of the fate of “passporting of rights”, which currently allow any financial company within the bloc to market its products and services in any EU country without having to establish a physical branch there. The bank’s lawyers had applied for the shift citing fears that the company faced a “real and immediate risk” of losing its right to conduct some operations within the EU.
Hordes more planning to move
With Brexit just weeks away, UBS has become the latest bank to seek legal redress for permission to leave the country. UBS will not be going the whole hog though by completely exiting the UK but rather plans to leave some critical operations, including equity trading, at its London offices. Nevertheless, the company plans to relocate high profile businesses such as forex trading and credit as well as corporate client solutions that cover finance, lending, leveraged capital markets, equity capital markets and M&A markets to offshore locations. Related: Return Of The Government Shutdown May Be Inevitable
The company says it has diligently assessed the impact of its decisions and found that the benefits outweigh the exigencies of shifting to a new location. The move could happen just a month after Brexit’s deadline on March 31.
Dramatic as it might seem, UBS will merely become a statistic as thousands more plan to take flight after the landmark event. As per The Guardian, a survey of 1,200 firms by the Institute of Directors (IoD) has disclosed that nearly a third of UK businesses plan to relocate their operations to other countries in the event of a no-deal Brexit. And, this is not merely empty rhetoric—11 percent have already set up overseas operations as a no-deal Brexit appears like a real possibility amidst a Westminster gridlock. The IoD represents 30,000 firms.
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Source: The Guardian
Large multinationals like Sony and Panasonic have already relocated their UK operations to other countries. According to the IoD, there’s a surge of smaller firms that have activated their post-Brexit plans over the past weeks.
Worst year since the financial crisis
The country’s biggest bank has fired a warning--exiting the bloc sans a proper deal would be economic suicide. The Bank of England has said the country faces the weakest growth in the post-financial crisis era that could even descend into a recession in the event of a no-deal Brexit.
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All is not lost though. The resilience of the Sterling Pound this year after last year’s massacre suggests that the market believes that a no-deal Brexit can still be avoided.
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As UBS has declared, its decision to exit the country could be deferred if the English unit becomes convinced that suitable arrangements have been made between the UK and the EU before Brexit. Hopefully, many other UK companies feel the same way, too.
By Alex Kimani for Safehaven.com