Brexit poses unique challenges for the United Kingdom, questions that have never been asked before and issues to be confronted that will for many decades have a profound impact on the UK's relationship with wider Europe and possibly the rest of the World.
Like any well managed business, the UK financial services industry is hedging their bets as to what will be, and are either bulking up their continental European presence, strengthening partnerships with companies in other European countries or considering a whole-hearted shift (the least likely route taken by the over-whelming majority, for now).
Here at Clear Path Analysis, we’ve carried out our own assessment and as part of conclusions drawn, taken the decision to launch a series of reports and in time events focussed on German speaking markets (Germany, Switzerland and Austria, otherwise known as the ‘DACH’ countries, plus Luxembourg). Diversification is key, not just for my business but also our clients. Providing our customers access to German speaking markets will be a crucial component of our offering going forwards.
On the subject of Brexit, one issue more than any other burned in my mind through the latter part of 2017: the lack of public commentary from UK based financial institutions, pushing on the government to get the best deal possible, starting with ensuring the European funds passport is maintained. This one piece of law is as critical to the UK economy as the freedom of movement for workers. Without it, the exodus from the City will happen.
In an era of heightened ESG awareness, pushing publicly for the best outcome for UK financial services is as much part of the societal responsibilities of big banks, leading asset managers and consultants as requesting transparency in how portfolio companies are ran. A messy disruption brought about by the UK's exist from the EU would undoubtedly create economic turbulence and increase the possibility of investment losses for both retail and institutional investors. Understandably, most company management boards are more concerned with keeping their company out of political debates than seeking to get stuck in. However, publicly putting forward reasons that the financial services sector benefits from the likes of funds passporting is simply noting what is in the best interests of clients. Just think back to the Scottish Referendum of 2014 and the announcements from the likes of Royal Bank of Scotland, Standard Life and BP on the questions around future domiciling. It certainly swayed many voters views on what was best for them and Scotland more broadly.
Unusually, the lead in this area has been taken by Goldman Sachs, a usually publicly reclusive institution. Led by their CEO, Lloyd Blankfein, attention has been drawn to the real possibility of job outflows to Frankfurt and Paris. That in itself isn’t an issue for Goldman Sachs, after all, they’ve a global player with no required allegiance to one country per se. However, Blankfein clearly sees and is willing to talk about the bigger picture for financial services across Europe: few win when politicians needlessly dig their heals in.
So, though not a ‘cry to arms’, in 2018, and with just 14 months until EU divorce, heads of truly ‘leading’ financial service companies need to stand up and make sure their voices are heard. And institutional investors who entrust their precious capital to them, please speak up to. After all, as part of fiduciary duty, it’s important for the UK to get the best outcome, regardless of whether they’re on the ‘soft’ or ‘hard’ side of the Brexit argument.
2018, if nothing else, will be the year of make or break. At Clear Path Analysis, we’ll continue to be a platform for ideas sharing. I’d like to see as many commentators as possible use us to make a difference.
For institutional market industry analysis, see Clear Path Analysis Reports and Surveys.