Our recent survey concerning attitudes toward Brexit among asset managers indicated a 10% gap between UK asset managers and EU27 managers in self-perceptions of preparedness.
This gap is important on several levels. Firstly, it may indicate that asset managers expect the UK market to remain more open to overseas firms than vice-versa.
This is a reasonable assumption based on historic positioning – however, it may also signpost a lack of understanding in the EU27 of how far politics in the UK have changed since 2016, where the ‘openness’ of the UK to skilled overseas workers and its desire to maintain open markets on an asymmetric or even reciprocal basis are questioned by both the main political parties.
There are also signals from the Bank of England that it will reassert regulatory prerogatives after Brexit, which has the potential to influence the regime under which EU27 asset managers operating in London; in the medium term at least.
Secondly, it is a useful reminder that the export-oriented nature of the UK industry means it is more exposed to new trade barriers than its EU27 counterpart, where asset managers provide and distribute services within a national market or within the EU27.
However, there is a third potential explanation for this, which should register with any EU27 firm that uses the UK as a distribution hub or as a source of asset services. This is that the political and media debate in the UK acknowledges the potential disruption that Brexit will cause, whereas the EU political consensus – echoed by the media – has been that the economic impacts on the EU27 can be contained. It may well be that UK respondents to the survey are simply reflecting a more granular understanding of the risks than the EU27 respondents.
Our survey also highlighted a marked difference in priority accorded to the risks posed by a UK exit from the EU for the future handling of personal data. UK respondents ranked this as the fifth most important Brexit risk, whereas EU27 respondents ranked this second. Of course, this measures relative priority rather than absolute levels of concern, but nevertheless it may still reveal important business needs that could come to shape aspects of the Brexit negotiations, once these progress to discussing the future UK-EU relationship.
The secure transfer of data across borders is a material issue for any client-facing business that relies on cross-border distribution or cross-border delegation of functions; not only in the financial services sector but across the wider economy.
The EU (including the UK) has the most developed data protection framework in the world, and the European Commission is currently reviewing how compliance with EU data protection norms can be integrated into Free Trade Agreements.
This partly reflects the acute sensitivity about the use of personal data in Germany and central Europe in particular, which were brought into stark relief by the campaign of Austrian Max Schrems to introduce additional safeguards into the US-EU agreement on data transfer.
In August 2017, the UK Government published a position paper on the future free flow of data, advocating the preservation of the current rights and responsibilities for businesses and regulators.
While coverage of this issue has so far mostly focused on the technology sector or on intergovernmental cooperation on security, our survey shows that financial services providers will also have a key role to play in developing a workable framework, and that financial institutions may need to introduce additional controls for the transfer, storage and processing of data.
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