Passporting on the line
For UK asset managers with a client base in the EU-27, continued UK membership of the single market is vital because with it come passporting rights: the right to sell financial services in any EU country without having to set up a branch there. Contrary to what has been claimed by some leading Brexiteers, the EU has not granted passporting rights to any third country.
Even though Switzerland has one of the closest trading relationships with the EU and accepts free movement of people, Swiss asset managers such as GAM, UBS AM and Credit Suisse AM distribute their funds to the EU via London, and would likely be among the first to leave if the UK is to lose its passporting rights.
While only a couple of asset managers have announced they will be moving some staff and activities to the EU to secure single market access, even less have said Brexit doesn’t pose a threat to their business.
However, there is a possibility that the UK will retain passporting right post-Brexit. EU financial regulator Esma said in July that passporting could be extended to third countries for alternative investment funds. Such rights could theoretically be extended to Ucits funds too, but this by no means a formality.
Passporting rights will become one of many bargaining chips in Britain’s negotiations with the EU, and there’s no guarantee that PM May or Britain’s top negotiators, none of whom have a particularly close relationship with the City, will not be tempted to sacrifice passporting rights in exchange for control over immigration.
