A third of European asset managers planning for ‘no deal Brexit’

Over a third of European asset managers are now preparing for a “no-deal Brexit”, but nearly half also say that they are struggling to be ready on time for the UK’s exit from the European Union, which is now less than 200 days away.

A survey of 52 European asset managers by PwC has found that many European asset managers are now planning for a no-deal scenario – one which they are not yet ready for – and that Ireland, alongside Luxembourg, stands to be a big beneficiary of a post-Brexit transfer of functions out of the UK.

“Asset managers are very worried that a no-deal Brexit is a real possibility – the industry needs much greater certainty from regulators and policymakers.

“For their part, asset managers can’t afford to wait any longer to start making definitive arrangements for the post-Brexit marketplace,” said Andrew O’Callaghan, leader, PwC EMEA asset and wealth management practice.

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The survey shows that both Ireland and Luxembourg stand to win business as the UK readies its departure from the EU, with more than a third (39%) of European asset managers looking to Ireland, and 36 per cent to Luxembourg.

PwC’s research also suggests that many asset managers are considering moving a range of functions out of the UK as a result of Brexit.

They are most likely to be thinking about moving sales and marketing teams (42%), though compliance (19%) and portfolio management (17%) are also under consideration at many firms.

So far, a number of asset managers have opted to move some operations to Dublin ahead of Brexit, including Legg Mason, First State and Baring Asset Management.

Moreover, a survey last week found that Dublin has so far attracted more Brexit-related projects than either Luxembourg, Paris of Frankfurt.

Out of time

However, the concern now is that while more than a third of asset managers expect the UK to leave the EU on March 29th 2019 with no deal, the survey shows that fewer than a quarter are close to completing their preparations for Brexit.

Indeed PwC’s survey suggests that many firms are now running out of time to put arrangements in place for the post-Brexit landscape, with almost one in two (44%) still making preliminary assessments of their Brexit needs or have not started planning at all, while nearly a quarter (23%) do not expect to complete their Brexit transformation projects until 2021.

This raises doubts about their ability to continue marketing products, whether their corporate structures will be fit for purpose and how they will organise their people.

“Asset managers must not use the lack of certainty as an excuse to do nothing; while it is still possible to prepare for Brexit in time if firms prioritise their arrangements right now, further delay will mean they are almost certain not to be ready – in which case a no-deal Brexit in particular could cause such firms real problems,” Mr O’Callaghan warned.

Another factor is the time needed to get an authorisation, with both Ireland and Luxembourg currently taking six to nine months to process applications.