The Investment Association (IA) has said there could be “massive disruption” among asset management firms should the UK vote to leave the European Union.
Speaking before a Treasury Select Committee hearing, IA interim chief executive Guy Sears said a departure “would give rise to significant changes and disruptions” for fund groups.
Mr Sears was responding to questions from MPs over the stance the investment industry was taking on the UK’s forthcoming referendum on EU membership, and the potential impact of a ‘Brexit’.
Taking as a model the existing relationship between the EU and “third party” countries such as Switzerland, Mr Sears said there was a potential for “massive disruption”.
Firms wanting to offer services to European clients would need to show “equivalence” between UK and European regulations in the event of a Brexit, he said.
He added that UK-based Ucits funds would cease to be deemed as such should the UK leave the EU. Instead, they would be deemed alternative investment funds and subject to more onerous third-country distribution arrangements.
The interim CEO was also questioned as to whether the UK industry, which manages around 37 per cent of EU assets under management, would be affected by no longer contributing to EU regulatory developments.
Mr Sears said: “Given regulation dictates your access to markets, being subjected to regulation you had no part of would be less than optimal.”
But Mr Sears frustrated committee chair and Conservative MP Andrew Tyrie over the IA’s stance on EU membership, saying the trade body would not take a position itself.
“We can only represent the things we look at, and we look at the technical and regulatory issues should we come out. Whether the businesses benefit or do not depends on what they do,” he said.
“It is unlikely as a trade association that we would make that assessment [on whether to stay in or leave].”
John Barrass, deputy chief of the Wealth Management Association (WMA), echoed these comments, saying the organisation had similarly not made such an assessment. But he added: “we are having a debate with member firms...but do not have a conclusion.”
