Even if passporting rights are secured, the City will lose influence on EU regulation it will still have to abide by. And EU law is likely become less City-friendly, as countries such as France and Germany, will be keen to lure business away from London.
The prospect of increased migration control is also likely to weigh on asset managers.
The consequences of a more restrictive migration policy may be particularly strong for the UK financial sector, which employs relatively more EU nationals than other parts of the economy.
In a recent Brexit survey among asset managers, consultancy EY found that worries about the impact of restrictions of free movement of people are increasing.
“A quarter of respondents highlighted free movement of people as a key concern. It is notable that three of the four large asset managers that have highlighted free movement as important have done so since August, suggesting that this issue has moved further the sector’s agenda in recent weeks,” the consultancy said.
Amber Rudd, the UK Home Secretary, did little to allay their fears on Tuesday when promising to “ensure” UK companies would stop recruiting from abroad to “fill jobs that British people could do”.
There indeed is plenty of reason for asset managers to be worried about life after Brexit. Those companies with significant business in the EU better start preparing their contingency plans in case passporting rights are lost, if they have not already done so.
However, the threat may not be all it is cracked up to be. After all, PM Theresa May used to be a supporter of EU membership, before changing her position to ‘Brexit means Brexit’ after the referendum.
