UK election unleashes fund industry debate over EU

Senior figures across the UK’s £9tn asset management industry have clashed over how Boris Johnson should proceed in his negotiations with Brussels after the Conservative premier reinforced his pledge to “get Brexit done” following his decisive election victory.

The end to the UK’s political logjam has prompted fierce debate about how the City of London should preserve its competitive edge post-Brexit.

The Investment Association, the trade body for UK asset managers, urged the prime minister to overhaul the regulatory framework for the investment sector, even as senior industry figures warned against diverging from European rules.

Ensuring that the UK retains its position as a leading financial services hub with close economic ties to the EU should be a top priority for the government, said Patrick Thomson, chief executive of JPMorgan Asset Management’s business in Europe, the Middle East and Africa.

“Investments made by the asset management industry create jobs, help business to grow and support communities across the UK. It is extremely important for the government to bear that in mind as it enters negotiations about the future relationship with the EU,” said Mr Thomson.

Richard Buxton, head of UK equities at Merian Global Investors, rubbished suggestions that the UK should embrace the “Singapore on Thames” concept of low regulation and low taxation.

Mr Buxton, who was in the office from 4.30am on Friday morning, said: “Clearly it is very important that we have equivalence in terms of regulatory standards [with the EU]. The new Conservative government will be very aware of the interests of the City and the asset management industry.”

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Saker Nusseibeh, chief executive of Hermes Investment Management, also called on the government to develop a strong relationship with the EU, which he called “our most important market”, while Graeme Anderson, chairman of TwentyFour Asset Management, added that “clarity of rules should be a priority.”

Asset managers’ Brexit concerns centre on the loss of passporting, which allows them to sell funds easily across the EU. They are also worried about market access rules for non-EU countries, known as equivalence, which can be revoked at short notice.

Chris Cummings, chief executive of the IA, urged the government to use the forthcoming trade negotiations to “talk to its European counterparts about developing a more structurally sound mechanism for equivalence”.

But he also called on the new government to develop a regulatory regime that prioritised the competitiveness of the UK fund sector.

“We need to be clear-sighted about the fact that post-Brexit the UK will have to pay its way in the world — and asset management is one of its truly global industries,” said Mr Cummings.

“Ours is not a plea for a bonfire of regulation but a call for rules that are proportionate, cost-effective and fit for purpose in the 21st century,” he added.

Dominic Johnson, chief executive of Somerset Capital Management, argued that the UK could develop into a strong international fund management hub, with products that appealed to Asian and US investors. “London can still remain the financial capital of the world — there are so many opportunities for us now,” he added.

The former Conservative party vice-chairman, who co-owns Somerset with Tory MP Jacob Rees-Mogg, said setting party political allegiances aside, the fund industry would welcome the outcome of the election and the clarity it gave to Brexit.

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The UK has until the end of 2020 to negotiate a future trade relationship with the EU unless an extension to the Brexit transition period is agreed.

Mr Nusseibeh added: “The prime minister has committed to a very short timetable. The hard work for him starts now.”


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