Scotland is presenting itself as an alternative location to London for finance jobs. If the UK triggers Article 50, Scotland is likely call for a second referendum for independence in order to preserve its EU status. Suddenly, the theory goes, it’s a new challenger to the City.
If this all sounds positive for the financial services sector, Scotland’s £520bn asset management industry isn't feeling it.
“The feedback we get from clients is that a second Scottish referendum is a big risk,” says Colin McLean, managing director of SVM Asset Management in Edinburgh. “We’re a long way from knowing what arrangement the UK will strike with the EU, but the fund management industry’s support of the Remain vote doesn’t translate into an appetite for independence.”
We’ve been here before, of course. At the time of the 2014 Scottish referendum, asset managers north of the border feared that setting up a new, independent regulator could cost the industry millions. What’s more, independence from the UK would also mean being in a separate jurisdiction to the majority of their customers.
Weighed against this is the risk that leaving the EU would mean ‘passporting’ arrangements are cancelled and talent could no longer freely move between borders.
The potential loss of EU talent didn't bother the Scottish asset managers we spoke to. “If I look around our investment team, I’d say 80% are from the UK,” says the head of recruitment at a large independent asset manager in Edinburgh. “We tend to recruit at a graduate level and train out employees up. Most come from local universities and are Scottish.”
“Asset managers in Scotland are not hugely reliant on EU talent. It’s not as cosmopolitan as London, or even Dublin,” confirms Graeme Knox, managing director of Scottish fund management headhunters, the Knox Consultancy.
Scotland may not have the luxury of waiting it out. UK asset managers are already shifting jobs to other EU countries following the Brexit vote. Since the referendum, M&G, Columbia Threadneedle, Legg Mason, Fidelity International and T Rowe Price have all unveiled plans to move people to either Dublin or Luxembourg.
“The recruitment issue is one of geography, not nationality,” adds Knox. “We recruit from the local market because it’s traditionally been harder to persuade investment talent to move north of the border. So, yes, a lot of the talent pool is British, but not having access to EU talent could be an issue in the future.”
Scottish MP and former Deutsche Bank investment banker, Ian Blackwood, confirmed this week that Scotland has already opened talks with financial services organisations to sway them from London to north of the border. Key to this, however, is an independent Scotland and maintaining access to the single market.
“Scotland’s priority now is to remain in the single market which would allow us to benefit from passporting rights for financial services,” Blackwood said.
For now, Scotland’s plans are vague compared to other EU states with their eye on the asset management industry. Ireland’s fund body has already tasked a 38 member group with investigating how it could benefit from Brexit. Luxembourg’s fund association has a dedicated working group aiming to steal asset management business from the UK.
Scottish asset managers also point out that although they may not be hiring from Continental Europe, that doesn't mean they haven't benefited from migration.
“One of the biggest concerns for us is gaining access to expertise that cannot easily be found in the local market,” says the asset management recruiter. “Most of our people are Scottish, but many bring experience of other markets that was only possible because of the EU’s free movement of people.”
“We have analysts with experience of working for employers in Continental European firms,” adds McLean. “Our firm, and the asset management industry in Scotland, has benefited greatly from an EU without working restrictions.”