UK fund groups could face costs of £2 billion a year to comply with EU regulation, according to a new report.
In a report called Asset management in Europe, written by think tanks Open Europe and New City Initiative, the cost of complying with EU regulations which directly and indirectly affect UK-based asset managers is estimated at £2 billion a year.
‘The main EU regulations directly or indirectly impacting the UK asset management industry come with an estimated cost of around £2 billion a year,’ the report said.
It also said that individual fund managers in the UK which marketed and distributed funds in the other 27 EU member states and Switzerland face initial costs of £1 million (€1.5 million) and ongoing costs of £980,000 (€1.4 million).
‘We estimate that a UK-based fund manager marketing and distributing in all the other 27 EU member states plus Switzerland would face total initial costs of over €1.5 million,’ it said.
‘Total on-going maintenance costs, allowing for the continuation of cross-border marketing, could be near €1.4 million per year.’
Dominic Johnson (pictured), chairman of the New City Initiative and chief executive of Somerset Capital Management, said the costs showed that smaller assets management firms did not receive the benefits of EU membership.
‘The free trade zone initially created by the European Economic Community (EEC) and the efficiencies (supposedly) generated by a single currency, all should lead to an increase in trade, benefitting all concerned,’ he said.
‘However, the investment management community and especially the ‘boutique’ community find that the regulatory burden imposed upon us by the EU is so expensive and onerous, that in themselves these regulations are an issue in terms of our business sector prospering.’