Middle East exodus from London expected after Brexit: CFA survey

Middle Eastern investment in the UK is set for a downturn following the Brexit decision, according to a survey of international financial investment professionals, with its CEO dubbing the findings as “disturbing” and “challenging reading” regarding the UK’s future as an international financial centre.

Global investment association the CFA Institute surveyed 2,043 members on the impact of Brexit on the global economy, between July 13 and July 21 this year, with a majority having a bleak outlook for Middle East investment in the UK following the vote.

The majority of respondents, 58%, said that they believe that Middle East companies will downsize their presence in the UK in the wake of Brexit. And just 10% of professionals surveyed said companies from the Middle East with significant operations in the UK would seek to expand in the country. And just 5% indicated that they thought firms from their local market might increase their presence in the UK, the CFA survey highlighted.

‘Disturbing data’

Will Goodhart, chief executive of CFA UK, said that the survey makes for “challenging reading”  and highlights “disturbing data” for the financial services sector in the UK and for the policymakers that will work on the Brexit negotiations.

“60% of EU respondents expect local financial services organisations with a UK presence to reduce that presence,” he said. “The numbers are better from non-EU respondents, where just 44% of respondents expect their local financial services companies to cut back in the UK, but these are disturbing data.

“As we have seen in recent times, things can change rapidly, but as it stands a great deal of work will need to be done to maintain the City’s competitiveness as a global financial centre and to secure the broader economic benefits that flow from that,” said Goodhart.

Dubai ‘not affected’ by Brexit

On a more positive note for the region the survey highlighted that Dubai’s international competitiveness as a financial hub would not be affected by the UK’s Brexit vote, with 71% of respondents saying that they saw no impact of Brexit on Dubai’s financial hub, according to a statement issued by the organisation.

Of the 2,043 respondents, 1,029 were from Europe, Middle East and Africa (EMEA), including 385 from the UK, there were 550 respondents from the America’s and 464 from the Asia Pacific (APAC) region.

Future international financial centres

In terms of the relative attractiveness of international financial centres as a potential London replacement, Frankfurt and Dublin are thought most likely to emerge as ‘winners’ from Brexit, with 69% and 62% of respondents picking them as likely beneficiaries. Most expect little change in the status of financial centres outside the EU. 82% of respondents expect London to be a loser as a consequence of Brexit.

UK fragmentation

One of the scenarios that is most likely to occur following the Brexit vote is UK fragmentation, with 59% of respondents regarding it as more likely than not. More exits from the EU came next in the list with more than 48% of respondents seeing this as likely and just 26% thinking it unlikely. NATO disintegration was regarded as being the least likely outcome.

Most respondents expect the uncertainty following the referendum vote to last for up to six months (33%) or for between six and 12 months (25%), and a further 26% believe that the uncertainty may persist for up to two years.

 

Paul Smith, CFA president and chief executive of CFA Institute, said: “In the immediate aftermath of the Brexit referendum vote, we can see considerable variance over how long investment professionals expect market uncertainty to last, but that uncertainty will be with us for a while at least.

“In addition, while changes in the relative attractiveness of one financial centre over another will see some lose ground and others gain, those changes can be disruptive for clients and for investment management businesses.”

CFA Institute

CFA Institute is the global association of investment professionals and has nearly 142,000 members in 154 countries and territories, including 135,000 CFA charterholders, and 147 member societies. For more information, visit www.cfainstitute.org.

ABOUT THE AUTHOR
Gary Robinson
Deputy Editor, International Investment and Head of Video at Open Door Media Publishing. A fully qualified journalist and filmmaker with more than 20 years' financial services experience, both as journalist and originally as an IFA.

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