JOHN DALY: As Brexit ticks closer, firms face future without full facts

As the delicate endgame of Brexit fast approaches, some clear pockets of optimism for Ireland are beginning to shine through an otherwise gloomy picture, writes John Daly.

In a recent survey, more than a third of European asset managers indicated Ireland as their preferred jurisdiction in which to relocate UK functions after Brexit.

In preparation for the possibility of a no deal, Ireland was the most favoured location by 39% of asset managers, followed by Luxembourg at 36%, for any post-Brexit transfer of operations.

The time needed to apply to new regulators for authorisation is cited as a key factor, with both Ireland and Luxembourg currently taking six to nine months to process applications.

The survey, carried out by PwC in September, was focused on 52 European asset management companies, some with operations in Ireland.

The results showed that nearly half of European asset managers are struggling to be ready on time, with 44% still making preliminary assessments of their Brexit needs, while nearly a quarter do not expect to complete their Brexit transformation projects until 2021.

Given that asset managers do not have a clear view of how Brexit will affect their products, people or corporate structure, many firms are working on the basis of a no-deal scenario.

“As a gateway to the EU and the US, and having the same common law jurisdiction as the UK, Ireland is world class centre for financial services with a highly talented workforce, and a great location for investment management companies to operate,” according to Patricia Johnston at the PwC Ireland Asset and Wealth Management practice.

Ireland is working hard to ensure that we have the capacity, including necessary infrastructure, to support the continued future growth of the industry. We expect the heightened interest in Ireland, noted in the survey, to continue.

Just one in five predicted an orderly exit for the UK from the EU with an agreed transition period.

For many businesses, the possibility of a transitional period lasting until the end of 2020 if a Brexit deal is agreed has made little difference to the tempo with which they are progressing their Brexit projects.

The PwC survey shows 19% of asset managers intend to launch new products in the UK following Brexit, while 35% have plans for launches in the EU27.

However, in the absence of a deal on financial product passporting, equivalence or even a temporary permissions regime, it is not clear whether they will be in a position to fulfill their ambitions.

The research suggests that many asset managers are considering moving a range of functions out of the UK as a result of Brexit — most likely sales and marketing teams, with compliance and portfolio management also under consideration.

With managers looking at relocating structures, firms are under pressure to consider how they might redeploy their workforce.

More than half the asset managers in the research say that they are exploring ideas such as splitting employment arrangements across territories or asking staff to commute between one or more territories.

Around a quarter are planning to ask staff to relocate to a new territory.

None of these options are straightforward, and the lack of certainty about immigration rules in the UK and the EU27 in the medium to longer term are also complicating plans.

As the clock ticks ever closer to the Brexit deadline, businesses are being forced to make fundamental future decisions but doing so without a full grasp of the facts.

That said, sitting still is not an option even in an environment lacking any degree of clarity.

Failure to act now in preparing for an uncertain future will result in even greater problems down the road.

One wonders if that trademark phrase of Winston Churchill during the Second World War will achieve a renaissance in the English vernacular over the coming months: “Keep buggering on.”

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