One month until the Brexit referendum

Today we are exactly one month away from the referendum that will decide the fate of our economy and more importantly our ability to get on with our neighbours.
Turn out is anticipated to be high. The Scottish referendum generated a huge 85% turn out. The support for the Brexit Leave and Stay campaigns have produced remarkably balanced polls; the Stay campaign gaining favour with 44% of the polled votes and the Leavers marginally behind at 40%. The polls also show that it is anyone’s game with 12% of the electorate still undecided[1]. The risk of an exit is high. We are going to argue for your engagement to Stay in 16 points.

Does it matter?

1.       No matter what the outcome on 23rd June 2016, the 24th June will be business as usual. If Britain leaves the EU, it still has to formally ask, and then there is a two-year period for the Brexit agreement to be negotiated and the terms of Britain’s leaving the EU to be agreed.

2.       Nonetheless we already suffer as investments and fund launches are delayed. New launches are down 20% quarter on quarter and leaving will only make it worse.

3.       Approximately half of the world’s largest financial firms have their European headquarters domiciled in the UK[2]. For those that argue that Britain can continue as such they are forgetful of the state of Britain in the 70s. This can happen again.

4.       The UK controls 37% of the EU’s AUM[3], which we all know is very mobile, a lot could be lost very quickly. Considering that we continue to attract most European talent to leave the EU could have disastrous business consequences.

The EU is a drain on our finances and economic growth

5.       The arguments that the EU is expensive have been discredited, we pay net as much as Norway and yet we sit at the decision table. It also ignores the economic external costs of an exit.

6.       The arguments that we would have a stronger economy do not seem to link to any plans as to how or why that would be. They point to a bias from notably wealthy fund managers who are perhaps more worried about paying taxes in a broader EU.

7.       The Leavers want to leave the EU and the EEA, this would be an even worse disaster and definitely take us back decades … every trade specialist tells you it would take years to negotiate anything and that may not even be a good deal.

8.       The UK has done so well in the EU providing the right level of influence and benefiting from an exclusion from the ERM and Schengen. We have the best position and we can push the EU even further on a more liberal agenda. The EU has brought stability and benefits.

The EU includes countries that we don’t want to pay for

9.       One strong argument is that the EU forces us to contribute for other failing economies like Greece. The reality is that many other EU states are party to the Greek debt issues and they have huge debt exposures which you probably cannot solve by shooting the borrower. So it won’t happen and we have to continue to pay. Hard to say what is fair, but again even the UK had an IMF bailout. Is bad economic management a reason to leave when you can change things from within?

10.     The EU is, regardless of the pace of change, worth it because it has brought us 70 years of peace. Many Leavers love to look up to Trump and Putin arguing that the EU is weak. Yet the EU has stood up to Russia on Ukraine and is a balancing block between two potentially volatile extremes in the USA and Russia. It has large military potential and nuclear capacity.

I hate regulations and it is all the EU’s fault

11.     The Leavers’ arguments that we have too much regulations from the EU forget that we have too much regulation generally from all governments in the world, including the UK which on its own came up with the Senior Manager Regime recently. This will not change (who would want another RBS failure or a Madoff scandal on our shores?) and if anyone wants to change this they can vote whether in the UK or EU for reforming politicians.

12.     We need to remember that the G20 is also a huge force in pushing for new laws and regulations notably in matters of taxation. Would the Leavers argue for us to leave the G20 as well?

13.     Not to mention that a lot of those EU laws are drafted after much research and lobbying to match the best that is in the EU and allow the free movement of goods and services. Look at cheap flights and roaming charges, it is not all about MiFID or the AIFMD.

14.     Considering EU fund regulations, it has been an amazing success: look at the sales of funds across the EU from the UCITS regulated funds. Ask a Swiss manager if they can sell a Swiss fund in the EU or check how many Swiss managers are now regulated and operating from the UK instead of Switzerland. The EU allows access to over 700 million potential investors, a far cry from the UK’s current population of 64 million.

If you want to change the EU practice voting!

15.     Only 35% voted in 2014 for their MEP, instead of leaving the EU and inheriting tons of unknown problems electors could spend a bit of time voting for reformists.

16.     At the AIMA conference for alternative fund managers last week 60% of participants indicated their intention to remain in the EU with 30% wanting to leave and the rest not voting or not decided. May be an indication of what asset managers are really thinking?

So in four weeks consider what your vote will do. Also think of the people around you that may be undecided. On balance, it is not just the movement of funds, management companies and the added or reduction of regulatory or administrational burdens that will form the minds of the polled 12% undecided swing voters. It will be the fear of the fall in the growth of property prices, the projected 30,000 less jobs by 2030 in the financial services sector[4], and the potential negative effect to the UK’s Aa1 sovereign rating[5]. Whatever way you look at it, what you don’t like does not mean you have to leave, but rather you have to strive to make it better by staying in. And if in doubt remember that Cornish Pasties, so dear to some Leavers, are a protected designation only thanks to European law [6]!

[1] YouGov poll, 17/05/2016, sample size: 1,648, published by the FT

[2] Bank of England, EU membership and the Bank of England, October 2015

[3] Investment Associations Annual Survey September 2015

[4] PWC, Leaving the EU: Implications for the UK financial services sector, April 2016

[5] Moody’s, Brexit presents modest and manageable credit challenges for exposed issuers, March 2016

[6] Cornish Pasty is a Protected Geographical Indication (PGI) is one of three European designations created to protect regional foods that have a specific quality, reputation or other characteristics attributable to that area

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