Banks Aside, U.K. Still Creating Jobs After Vote to Leave EU

Updated on
  • McDonald’s, Glaxo, ARM, Sainsbury all hiring, but Lloyd’s cuts
  • Politicians hail investment as economists warn of recession

For U.K. employers, it’s a tale of two Brexits.

While companies in industries from fast food to pharmaceuticals have moved to add thousands of jobs since the country’s vote to leave the European Union, the outlook for the financial sector is more subdued. Lloyd’s Banking Group Plc said Thursday it will cut 3,000 positions.

U.K. politicians have trumpeted job-creation announcements by companies like burger chain McDonald’s Corp., drugs giant GlaxoSmithKline Plc, chip designer ARM Holdings Plc and grocer J Sainsbury Plc as signs that the U.K. economy remains robust, despite economists’ expectations of a looming recession in the wake of the vote.

U.K. officials’ upbeat assessments contrast with dire warnings before the June 23 referendum from former Prime Minister David Cameron about the potential fallout of Brexit. For now, the country’s labor market remains more vibrant than those of many continental European economies, and the U.K. is an attractive place to invest, officials say.

“The government is committed to ensuring businesses have the support they need to thrive and today’s announcement underlines that businesses are confident that the U.K. remains open for business,” Greg Clark, the industrial strategy minister, said Wednesday in a statement about McDonald’s plan to add 5,000 U.K. jobs.

The fast-food provider’s planned expansion, which will lift its U.K. employment to more than 110,000, follows the announcement of a 275 million-pound ($360 million) investment in new U.K. plants by Glaxo, which said Wednesday that it would increase capacity to make respiratory and biologic medicines, mostly for export.

A plunge in the pound after the referendum has given U.K. exporters a boost, lifting share prices of companies ranging from distiller Diageo Plc to cigarette maker British American Tobacco Plc. 

Some domestically focused companies are moving ahead with investment plans, too. Sainsbury said last week that it would create 900 jobs in London -- hiring drivers, order pickers, shelf stackers and manager -- for its online shopping service. London Mayor Sadiq Khan hailed the move as a sign that London is “open and the best city in the world to do business.”

ARM, AstraZeneca

Drugmaker AstraZeneca Plc said Thursday it planned to increase spending on research and development significantly in the U.K., providing a boost for the country’s scientific community. Smith & Nephew Plc said it was sticking with plans to build a surgical skills center near London.

Astra’s expansion plan follows plans by ARM, one of the U.K.’s most successful technology companies, to create at least 1,500 new jobs over the next five years as part of a planned $32 billion takeover by SoftBank Group Corp. of Japan. 

SoftBank CEO Masayoshi Son met with U.K. officials before the announcement, and Prime Minister Theresa May and others welcomed the investment as a sign of confidence in the U.K. economy. Previously May had said she would urge the government to scrutinize takeovers by non-U.K. companies more thoroughly.

The flip side of the coin is London’s once-thriving financial sector, where the threat of Brexit has compounded concerns over a general slowdown for the industry. Financial institutions are monitoring whether they’ll be able to retain the right to operate across the EU from a London base, as well as possible restrictions on hiring EU workers.

At Lloyd’s, concern over a possible Brexit-linked recession is adding to pressure stemming from persistently low interest rates. Its job reductions are the first big cuts in the U.K. financial sector since the referendum.

After the vote, “interest rates will continue to be lower for longer,” CEO Antonio Horta-Osorio said.

The bank has already cut about 7,300 employees under a cost-reduction plan as it moves to adapt to the rise of digital banking.

U.K. unemployment fell to an 11-year low of 4.9 percent in the three months through May, despite signs that business and consumer confidence were already weakening ahead of the referendum.

Economists said the trend in joblessness could reverse as those factors kick in over the coming months. The Bank of England is widely expected to lower interest rates in August for the first time in more than seven years.

Economists surveyed by Bloomberg expect the U.K. economy to contract in the third and fourth quarters, marking the country’s first recession since 2009. That’s affecting companies in a variety of ways not yet visible in official statistics.

Billboard operator JCDecaux SA said it was reviewing capital-spending plans in expectation of a slump. Ford Motor Co. expects Brexit to cost it about $200 million this year, rising to $400 million to $500 million in 2017 because of falling demand and currency effects, executives said Wednesday.

“If you look at the anecdotal information you’ll start to see rising unemployment fairly soon,” said George Magnus, senior economic adviser to UBS Group AG. “If we can’t sustain growth momentum, then the corollary of that will be job cuts.”

— With assistance by Simon Kennedy

(Updates with Ford, JCDecaux in 19th paragraph.)
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