K & K G L O B A L C O N S U LT I N G
RESEARCH
UNITED KINGDOM
Prime Minister Theresa May has taken a leap of faith
announcing an election on the 8 th June 2017 in the
hope of gaining a majority position to push through the
conservative parties Article 50 negotiation program with a
hard Brexit. PM May is challenged by two major parties; the
Labour party who aim to adjust the Article 50 negotiation,
protecting EU labour in the UK, and the Liberal Democrats
who aim to implement a second EU referendum overruling
the previous referendum result in 2016. The majority
of the asset management firms should already
have built in the risks of Brexit into their
portfolios. The buy side in Germany, France and the
Nordic countries are still expecting London to remain the
major financial capital outside of the European Union. One
buy side in Germany said the Brits are smarter than letting
their financial industry fall and will come up with measures
to preserve it. Slashed corporation tax is one potential
measure and it will be interesting to follow the FCA's
stance of leading the way to being the toughest regulator
in Europe. The British politicians will need to evaluate the
importance of keeping American financial institutions in the
City and could in theory change direction to ease financial
markets regulation and subsequently increasing their
competitive advantage. This leads to the question,
what is more important, adhering to MiFID II
remaining a solid EU trading partner or making
it easy for the global market to transact
business in the UK?
GERMANY
The German election on 24th
September 2017 will unlikely
result in any major volatile events.
Yes, German Chancellor Angela Merkel is
challenged but latest opinion polls are not
indicating any lead by anti-establishment
parties that will rock the markets. While
Frankfurt has been mentioned in the media
as an alternative future European financial
capital, the local buy side say that current
infrastructure is neither on par with London
nor ready to support it. The German buy
side doubt that a large number of English
speaking senior decision makers within
financial institutions in London would by
default, decide to relocate their families to
Frankfurt, purely on the basis that it would be
more appropriate for the firm to reside within
the EU.
Summer 2017
FRANCE
Emmanuel Macron's historical
landmark win in the general
election on 7th May saved
the European Union and it's
common Euro currency for at
least the next 5 years. President
Macron is focused on preserving a
strong EU consensus and adherence.
Macron is expected to become a tough
negotiator against Great Britain in the
Article 50 negotiations defending EU's
interests.
The majority of the buy side in
Continental Europe tell us that they do
not expect Paris to become a future
financial capital. Despite many people’s
love for the country and its capital,
there are already increased signs that
it is more likely that American financial
institutions will transfer many of their
London functions back to the USA
instead of Paris.
ITALY
Due to the large amount of Italian retail savings within
debt, this election expected in February 2018
may cause short term ripple effects in the
fixed income markets if the Eurosceptic Five Star
Movement wins. However, it is by no means the end of
the Italian membership within the European Union as
a) such membership decision would have to be elected
through a referendum, b) pass a maze of bureaucracy
and c) while the Five Star Movement is popular, it does
not mean that the majority of Italians would want to
break their membership with the European Union.
www.buysideintel.com
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