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IPE special report May 2018

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Managers have three months to guard against no-deal Brexit

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Asset managers have just three months left to apply for a Dublin authorisation should the UK crash out of the EU without an agreement over its future relationship with the bloc, Irish investment experts have warned.

In the event of a so-called ‘hard Brexit’ , July is the cut-off point for a process that could take between six and nine months, according to Mark White, head of the investment management group at McCann Fitzgerald, a leading Irish law firm.

“People are starting to count backwards [from the Brexit date of March 2019],” he said. “I think you will see a number of applications going in over the summer from UK asset managers and other financial services businesses that need to continue to access the EU market post-Brexit and are not prepared to operate on the basis of ‘let’s hope it’s all right on the night’.”

Last month, the UK and the EU agreed to a conditional transition period until 31 December 2020 as a possible route to a more orderly withdrawal from the union. This would extend the date for the completion of any business restructuring that might be required in order to continue to access the EU, post-Brexit. 

However, the deal will only remain in place once contentious issues – such as the border between the Republic of Ireland and Northern Ireland – are agreed.

Central Bank of Ireland

Central Bank of Ireland

Credit: William Murphy

According to six-monthly statistics issued by the Central Bank of Ireland, the number of investment companies seeking authorisation in Dublin has remained flat over the past two years to the end of 2017. Just one firm per six-monthly period gained authorisation in the first and second halves of 2016 and the first half of 2017. 

No new firms were authorised in the second half of 2017.

However, the rate was likely to increase exponentially as asset managers sought to alleviate the possible impact of the UK crashing out of the EU, said Paul Traynor, partner in financial services advisory at EY Ireland.

Investment managers were “making ‘no regret decisions’ that they would take one way or another regardless of Brexit”, Traynor said. “Now they are looking at taking decisions that they may regret – for example, having to sink some cost into something that they might regret regardless of whether we see a hard or soft Brexit.”

The number of investment firm authorisations is likely to jump to double-digits over the next six to nine months, Traynor added.

Firms are getting to the point “where they can delay their plans no longer”, he said.

A spokesperson for Ireland’s central bank said they did not comment on authorisations or applications. However, in a speech given in January to the European Financial Forum, Philip Lane, the bank’s governor, said he expected the current levels of authorisation to increase further.

Dublin was very much open for business, he said. “We have put in place authorisation processes that are transparent, predictable and consistent. Firms that are engaging with us will find us open, engaged and pragmatic.”

Some UK-based managers have expanded existing subsidiaries in Dublin or Luxembourg to ensure European clients are not affected by the UK exiting the EU.

Aberdeen Standard Investments and Royal London have set out plans to boost their Irish offices, while M&G and Jupiter have done the same in Luxembourg. 

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