New Haven Register (Sunday) (New Haven, CT)
Job losses at UBS highlight change in state’s incentives
STAMFORD — For most of the past decade, financial-services giant UBS has fallen short of the job benchmarks needed to earn full forgiveness of the $20 million loan that the state awarded the company in 2011.
UBS missed its target again last year, in its final year of the 10-year agreement with the state Department of Economic and Community Development. It averaged 1,136 jobs in Connecticut in 2021, compared with a goal of approximately 1,750 positions, according to new Department of Economic and Community Development data obtained by Hearst Connecticut Media.
The Switzerland-headquartered company’s dwindling headcount in Connecticut has highlighted the limits of large, custom-designed corporate incentives, which were widely deployed under former Gov. Dannel P. Malloy.
Gov. Ned Lamont’s administration has offered its own financial aid to businesses over the last three years — but it has adopted a much different strategy.
“There is a need for some types of incentives,” David Lehman, the DECD commissioner since early 2019, said in an interview. “But we’ve used them a lot less, and the amount of the incentives is generally less as well.”
Long job decline
UBS ended up earning $12.5 million in loan forgiveness and having to pay back the remaining $7.5 million of the 2011 loan. If it had met all its job targets, it could have earned 100 percent forgiveness.
The outcome reflected the decline of average headcount at UBS in Connecticut in every year except one since 2012. The annual average fell below 2,000 employees in the state after 2014, the third and final time the company hit the target for maximum forgiveness.
Even by 2014, UBS’ job levels in Connecticut had fallen a long way. The company’s average employment had reached an in-state high of about 4,000 in 2007, according to DECD. Its boom was encapsulated in a sprawling trading floor in the pavilion of the downtown Stamford office complex at 677 Washington Blvd., which was widely described as the largest such trading facility in the world.
The employment decline contributed to UBS’ move in 2016 of the operations at 677 Washington into smaller space across the street at 600 Washington. The trading floor had closed before the relocation.
It is not clear the extent to which layoffs, positions unfilled after resignations and retirements, or a combination of those factors, have contributed to UBS’ downsizing in the past decade.
Unlike fellow 600 Washington tenant NatWest Markets — which formerly did business as Royal Bank of Scotland and reported more than 700 Stamfordbased layoffs between 2015 and 2018 — UBS has not sent any Worker Adjustment and Retraining Notification Act notices to the state Department of Labor in the past few years, online records show.
UBS has initiated companywide job cuts across its largest divisions as part of a restructuring plan aimed at saving $1 billion during the next three years, Bloomberg reported last May.
UBS declined to directly answer an inquiry from Hearst
about the reasons for the employment drop in Connecticut. “UBS remains a longstanding employer in Connecticut and continues to make significant investments in the community and in our client-facing and corporate businesses,” the company said in a written statement.
A high-profile history
UBS burst on the scene in Connecticut with the announcement in September 1994 that Swiss Bank, a UBS predecessor, had reached a deal with former Gov. Lowell P. Weicker Jr. to bring at least 2,000 jobs to Stamford from New York City.
The blockbuster package, including all incentives and electric rate concessions, was valued at an astounding $165 million, with negotiations led by Joe McGee, then Weicker’s economic development chief, later a vice president at the Stamfordbased Business Council of Fairfield County.
That heady era ended with the 2008 financial crisis, which hit banks hard and brought tighter regulations affecting international multi-line banks. The 2010 Dodd-Frank Act, for instance, includes significant restrictions on how banks can invest.
“There’s been a heightened level of regulation in the U.S. and more concern in UBS’ home country of Switzerland about its basic solvency and strength,” Lawrence J. White, a professor of economics at New York University, said in an interview.
“Both of those factors have caused UBS to say, ‘We can’t give up on the U.S., but we just can’t have the extended footprint that was our aspiration 15, 20 years ago.’”
Despite the continually shrinking headcount, UBS remains a prominent force in Connecticut. Its in-state contingent included about 800 in Stamford in the third quarter of 2021, the most recent quarter for which Stamford’s Office of Economic Development has jobs data. At that point, it ranked as the city’s 10thlargest employer.
Focus on wealth management
Last week, the company announced the opening of new branch offices in Greenwich and Stamford for its wealth management business. The Greenwich offices moved a couple of blocks, from 100 Field
Point Road to 100 W. Putnam Ave.; the Stamford offices moved down the street, from 750 Washington Blvd. to 600 Washington.
In a news release, UBS said wealth management executives in the state have focused on “growing the firm’s presence in Connecticut with high net worth and ultra-high net worth clients.”
“Connecticut is a very important market to UBS and home to many of our talented financial advisers,” Julie Fox, Northeast market head at UBS Private Wealth Management, said in a written statement. “We are committed to embracing new ways of working by providing our employees with productive work spaces located closer to where they live and believe our new offices will enable us to better serve our clients’ needs.”
Within Connecticut, UBS also maintains offices in Westport, New Haven, Hartford and New London.
Headquartered in Zurich, UBS employed nearly 73,000 people worldwide at the end of 2021. In addition to wealth management, its core operations are asset management, investment banking, and personal and corporate banking, among other services.
‘Market conditions can turn’
By the time its 2011 state loan was awarded, UBS had been reeling for several years in the wake of the financial crisis.
For 2008, UBS reported a loss of around $20 billion, the largest ever by a Swiss corporation. As part of subsequent downsizing, the company said in February 2009 that it would eliminate another 2,000 positions in investment banking — aiming to bring its headcount down that year from about 77,000 to 75,000, Reuters reported at the time.
On the same day in August 2011 that the DECD loan was announced, UBS announced it would cut about 3,500 positions worldwide.
In an interview last year, Malloy said that he and his economic development team hoped the $20 million loan would mitigate UBS’ job losses and prevent the firm’s possible exit from the state.
“There had been comments in European press, as well as making its way into American press, about some of the [UBS] directors seeking or preferring a reconsolidation into New York City,” Malloy said.
“We were literally battling for very high-paying jobs — jobs that were paying
substantial employee taxes.
“Clearly, it didn’t meet the desired number of jobs retained,” added Malloy, who is now chancellor of the University of Maine system. “But there are those [current] jobs. Sometimes, you have to enter into a transaction hoping for the best, but clearly understanding that market conditions can turn on any company. And if any company saw market conditions turn, it was this one.”
A change in thinking
UBS was one of a number of companies in the Malloy years, 2011 to 2019, that were awarded eight-figure subsidies and incentives based on job creation and retention. Other recipients in the financialservices sector included Westport-based Bridgewater Associates, the world’s largest hedge fund, and Greenwich-based AQR Capital. The two, respectively, qualified for incentives totaling up to $52 million and $35 million.
Lamont and Lehman still see a role for corporate incentives as part of the neverending competition with other states that offer aid packages. But they have steered away from forgivable loans.
Instead, the Lamont administration has allocated incentives in smaller amounts, generally using a formula available to any company, rather than tailormade deals. That’s known as the “Earn as You Grow” model, in which companies must meet job targets before they can receive payouts.
Among the most-recent recipients are financial-services firms such as Digital Currency Group, iCapital network, Hudson Bay Capital and Tomo Networks. With the exception of Tomo, whose funding amount has not been finalized, those firms’ incentives are each in the sevenfigure range.
“We’re trying to make sure it’s transparent and simple, that it’s low cost to taxpayers and that it’s low risk,” Lehman said. “We need to have something (with incentives), but it’s not the No. 1 play in the playbook.
“We want to lead with all the great stuff happening in Connecticut — the tax certainty, the recent population growth, the [state budget] surpluses, the fiscal house getting in order. That’s what we’re leading with — not incentives.”