Brexit presents €4trn opportunity for EU asset managers

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European Union fund managers could attract €4trn in assets under management if they close the gap on the UK industry following the country’s exit from the union, a new report states.

The UK currently accounts for 41 per cent of assets under management in the European Union, but capital markets think tank New Financial argues the EU27 could claw some of this back following Brexit negotiations.

The report, What do EU capital markets look like post-Brext?, also points out that 75 per cent of Mifid passports are issued to firms based in the UK doing business in other EU member states.

The €4trn figure was calculated by examining what the potential for growth would be if EU27 capital markets depth matched the existing EU average while the UK is still a member.

The growth potential is for the industry is 42 per cent.

When it comes to capital markets activity as a whole the report found the UK accounted for 78 per cent of all EU27 activity and while unwinding the UK from the single market would be a “significant challenge” it also represented trillions of euros worth of opportunities.

The only activity where the UK did not dominate the rest of the EU27 was in fund domiciles due to Luxembourg and Ireland accounting for 45 per cent of this activity compared to the UK’s 12 per cent.

While EU27 capital markets are “half as developed” as the UK, the report breaks down the EU member states into three groups, with Northern Europe, including Scandinavia and the Netherlands, having the strongest capital markets.

This is followed by the big EU economies, such as Germany, Italy and Spain, that have “reasonably well developed capital markets but lower than the EU average”.

The think tank says it will be doing further research into the final group, Central and Eastern Europe, which has the least developed capital markets and therefore great potential opportunity.

The report adds that households in the EU27 were more likely to hold cash, but if they were to invest a quarter of these holdings – to bring them in line with UK households – this would unlock a further €2trn of capital.