UK funds see £800 billion in outflows to Europe, finds EY study

Since the EU referendum, 20 companies monitored by EY have announced a transfer of assets out of London into Europe.

By Joe Parsons

Large investment banks and asset managers have moved around £800 billion in assets from UK funds to Luxembourg-based vehicles, according to EY’s Brexit tracker.

Since the EU referendum, 20 companies monitored by EY have announced a transfer of assets out of London into Europe.

The study, which tracks 222 of the largest UK financial services firms and their efforts to minimise the effects of an uncertain Brexit on their operations, showed that 80 firms are considering or have confirmed relocating assets and staff.

While not all firms have publicly declared the value of the assets being transferred, the EY Brexit Tracker has followed public announcements worth around £800 billion.

“The closer we get to 29 March without a deal, the more assets will be transferred and headcount hired locally or relocated,” said Omar Ali, UK financial services leader at EY.

The study said of those companies that have stated they intend to transfer assets out of the UK, eight are investment banks, six are insurance providers and five are wealth and asset managers.

However, the value of assets being transferred is still modest given the total assets of the UK banking sector alone is estimated to be almost £8 trillion.

“Deal or no deal, financial services companies’ main priority is to protect their customers and investors from any post-Brexit fall-out and operational decisions are following a ‘prepare for the worst, hope for the best’ strategy,” said Ali.

Custodians have been optimistic throughout the past year that there will little to no impact of a hard or ‘no deal’ Brexit on their service provision.

State Street conducted a survey of 100 institutional and alternative investors comprising hedge funds, real estate funds and private equity firms in December to analyse the outlook for the UK fund management industry after it finalises its exit from the European Union.

Within an overall negative outlook for Britain post-Brexit in State Street’s findings, there were some optimism in the numbers.

Nearly a quarter of survey respondents in new research from State Street believe that more European-based fund managers will look to open offices in the UK after Brexit.

A BNY Mellon spokesperson also told Global Custodian that it foresees little to no impact on service provision” to its clients.

“We have examined our operations and our structure against a range of potential Brexit scenarios, including passporting, equivalency and a hard Brexit,” the spokesperson added.