Cantillon: ‘Brexit’ impact on funds played down

A new opinion poll by ICM puts the “Brexit” camp in a 2 percentage point lead over the campaign to keep Britain in the EU. It’s still early days, but this is hardly good news from an Irish perspective.

One consideration – among many – centres on the possibility of London-based funds migrating to Dublin to secure access to the EU market if Britain leaves the union. This was recognised in a Central Bank examination of “Brexit” implications last year in which Ireland was described as a “potential location” for UK financial services firms seeking EU access.

But how real is the prospect? In respect of large asset managers, a note by analysts at UBS bank finds the operational impact of a “Brexit” should be minimal.

Only 8 per cent of assets under management would need to be re-registered or re-domiciled. “Many of the asset managers we cover have fund platforms both in the UK and in Europe [usually in Luxembourg or Ireland] which would likely mitigate the operational risk if the UK decides to leave the EU.”

But the impact on smaller funds would be more negative. “We believe the impact could be more detrimental to the smaller asset managers operating in the UK as they are less likely to maintain fund platforms in the UK and the EU [via Luxembourg or Ireland]. Thus, they would be more negatively impacted if passporting financial services between the UK and the rest of the EU is banned.”

This could still raise questions for the Central Bank as any incoming funds, no matter what scale, would have to jump through Irish regulatory hoops.

In its report last December the Dame Street institution was clear: “The impact on the financial sector here might be significant, with positive and negative consequences from an economic perspective and a direct impact on the scale of Central Bank’s mandate, for example, arising from increased numbers of authorisations, changes in type and complexity of business models, including the possible establishment of financial market infrastructures, etc.”

One to watch.