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Will Morgan Stanley's Plan to Move 300 U.K Jobs Materialize?

Zacks Equity Research

Morgan Stanley MS, which currently employs nearly 6,000 people in the United Kingdom, is contemplating moving around 300 jobs initially out of London, post Britain’s exit from the European Union. This action is needed to keep its position secured in the EU and retain its “passporting rights.” The news was first reported by Bloomberg.

According to the report, three people familiar with the matter said that the U.S. banking giant is considering either Dublin or Frankfurt as its hub and is already looking for office space there, in order to create a larger EU market.

Hugh Fraser, one of the spokesperson for the U.S. lender said, "Our focus is on ensuring that we can continue to service our clients whatever the Brexit outcome." He also added, "Our strong franchise and material presence in Europe gives us many options, and we will adapt as the details of Brexit become clear. Given all of this, no decisions have yet been made."

Recently, many global banks have started taking similar steps to move operations out of London after Prime Minister Theresa May confirmed that Britain will also be leaving the European single market.

This is because many of the companies which operate within the EU, use “passporting rights” in relation to the UK in some way or the other and their passport status is highly dependent on if Britain remains a part of the single market or not. As a result, any Brexit-related deal will lead these companies to lose their “passporting rights” and hence they will have to go through the costly and complicated process of being regulated in each market within the EU where they operate.

Apart from Morgan Stanley, other banks like JPMorgan Chase & Co. JPM, Citigroup Inc. C and Goldman Sachs Group, Inc. GS also are planning to move their operations out of London.

Of the available options, Dublin and Frankfurt have been the choice of most of these banks for various reasons. Dublin is a preferred option because Ireland is currently being projected as the only country in Europe that uses English as their language and therefore, can help banks near London to continue their operations. Also, its labor laws are flexible and have good transportation links to the U.S.

On the other hand, Frankfurt has an excellent transport network with an airport serving as a super-connector terminal for flights between America and Asia. Moreover, per the data provided by Knight Frank Estate Agents, letting office space in this German financial hub would be cheaper compared to London.

Notably, in the past one year, shares of Morgan Stanley gained nearly 89.1%, outperforming the Zacks categorized Investment Brokers industry’s gain of 66.9%. The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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