Gina Miller, co-founder of fund manager SCM Direct and outspoken critic of the U.K. government’s approach to Brexit, says investors should lower expectations for how much access they’ll have to Europe’s markets following Britain’s divorce.
Many investors in London still aren’t being “realistic” about the level of access they’ll have to clients in the region’s economy after the U.K. leaves the European Union in 2019, Miller said in an interview. The European Economic Area, or E.E.A., consists of the 28 E.U. member states plus Iceland, Liechtenstein and Norway.
“Everyone is saying, we are going to be members of the E.E.A., but how realistic is that?” said Miller. “Being a member, but not being in the E.U., will mean we will still have to incorporate all E.U. regulations without E.U. representations and we would still have to make considerable contributions to single market access.”
The European Securities and Markets Authority is considering charging countries outside the trading bloc to regulate them, according to ESMA Chairman Steven Maijoor, who said earlier this month that such payments would help cover the costs of assessing risks that non-E.U. firms pose to the European financial system. Liberal Democrat treasury spokesperson Susan Kramer has expressed concern the U.K. government isn’t listening to what European policymakers are saying on regulation.
“It is like two conversations are taking place and one is not listening to the other,” she said. “Everybody is worried about the ability to access E.U. Quite a number of British entities will be harmed by the loss of passporting.”
Passporting is the term given to rules that allow fund managers to offer their funds in E.U.
The European Fund & Asset Management Association estimated in a report this month that the region had €22.8 trillion ($25.4 trillion) of assets under management at the end of last year.
Firm are starting to consider how they will serve existing clients and how they can manage costs post-Brexit, according to Andrew Gray, the head of PwC’s U.K. regional financial-services practice.
“A firm that does not have a legal entity within the E.U. will need to create a legal entity, and it will need to have that authorized by the appropriate legal authority to conduct business,” he said.
At the annual Finance Malta conference, the U.K.’s former trade envoy Jonathan Marland is expected to speak May 18 about the opportunities that exist for cross-border financial services within the Commonwealth, according to conference organizers. Marland, who had served under former British Prime Minister David Cameron, is now chairman of the Commonwealth Enterprise and Investment Council.
Miller said that the U.K. government appears over-reliant on The Commonwealth nations to bring about post-Brexit deals.
“There is a naivety on free trade deals happening and a reliance on The Commonwealth, which is a really interesting one,” she said. “I was at a Commonwealth event not so long ago and people were telling me that ‘Britain doesn’t seem to understand that we now hold all the cards.’”
A spokeswoman for Marland said he wasn’t immediately available for comment. A spokeswoman for the U.K. Department for Exiting the European Union declined to comment. The Department for International Trade did not immediately respond to a request for comment.
