New data reveals that Brexit has dealt a significant blow to the UK's fund management industry, with over €1 trillion in assets relocated from Britain to the European Union since the 2016 referendum. The shift underscores the long-term financial impact of the UK's departure from the bloc.
Massive Asset Migration
According to a report by the consultancy firm EY, more than 800 financial services firms have moved some operations from the UK to the EU, with asset managers leading the exodus. The total value of assets transferred is estimated at €1.1 trillion, equivalent to roughly 10% of the UK's total fund management industry.
The migration has been driven by the loss of passporting rights, which allowed UK-based firms to sell services across the EU without additional regulatory hurdles. Dublin, Luxembourg, and Frankfurt have emerged as the top destinations for relocated assets.
Impact on Jobs and Tax Revenue
The asset shift has also led to job losses in the UK financial sector. Around 7,000 jobs have been moved or created in the EU as a result of Brexit, according to EY. This has implications for UK tax revenues, as high-paying financial jobs contribute significantly to the Treasury.
“The scale of asset relocation is unprecedented and reflects the structural change in the European funds landscape,” said Omar Ali, UK financial services leader at EY. “While the UK remains a global financial hub, the full impact of Brexit on the fund management sector is still unfolding.”
Regulatory Divergence
One key factor driving the asset exodus is the UK's decision to diverge from EU financial regulations. The UK has introduced its own rules for asset managers, including the Overseas Funds Regime, which aims to grant equivalence to EU funds. However, the EU has not yet granted equivalence to the UK, creating uncertainty.
The European Securities and Markets Authority has warned that continued divergence could lead to a permanent fragmentation of the European capital markets. Meanwhile, UK regulators argue that the new rules will enhance competitiveness and attract global investors.
Future Outlook
Industry experts predict that further asset transfers are likely as the UK and EU finalize their post-Brexit relationship. The UK government has sought to downplay the impact, emphasizing that London remains Europe's largest financial center. However, the data suggests that the long-term trend is toward a more fragmented European fund management industry.
“The movement of assets is not a one-time event; it is an ongoing process that will continue as firms adjust to the new reality,” said a spokesperson for the Investment Association. “The UK must work hard to maintain its attractiveness as a global investment hub.”
