It is almost inevitable the UK’s financial services sector will be “less dominant” after Brexit, Lord Paul Myners, the politician and fund industry veteran, said at a conference in London on Thursday.
Myners, the UK chairman of Swedish activists Cevian Capital and a CQS board member, warned that uncertainty would last for years even if Prime Minister Theresa May passes her EU withdrawal agreement.
The City of London would remain the leading financial hub in Europe but other places would benefit from Brexit, he said.
The UK’s impending departure from the European Union at the end of March and its impact on the hedge fund industry and other financial sectors was a hot topic at the 2019 Funds Congress.
Aima CEO Jack Inglis played down the short-term impact on London’s hedge fund industry, saying he saw little staff movement to other parts of Europe, unlike in the banking sector and some other areas of finance.
“I don’t see any evidence of that at the moment,” he said, adding that about four-fifths of Europe’s hedge funds were based in London. “There is very little desire to move.”
He admitted that “not having a seat at the table in Brussels” could be damaging in the longer term to the interests of the hedge fund industry in the UK, which will be treated as a “third country” in future regulatory and trade talks.
Myners highlighted ESG investing, financial stability and systematic trading as examples of industry issues that the EU was scrutinising. He said Brussels would continue to analyse and possibly try to regulate such areas after Brexit even if most European financial services were based in London.
Myners was a member of Gordon Brown’s Labour government when the EU opened talks over the Alternative Investment Fund Management Directive and negotiated with Michel Barnier, who is leading the EU side in the Brexit talks.
Jo Johnson MP, who quit the government in protest at May’s Brexit plan, said the services sector was “the dog that hasn’t barked” in this debate so far. Services make up 80% of the UK economy but talk of goods has dominated.
Myners added that most politicians find the complexity of services “too difficult to handle.”
Funds Congress was staged in Westminster by Dechert, Carne and PwC.
City of London will take Brexit hit, warns Myners on EuroHedge.