Article published on 16 September 2020 www.igniteseurope.com
Luxembourgâ€™s finance minister has warned asset managers to brace themselves for a hard Brexit and told UK firms that they will need a physical presence in the EU if they wish to continue doing business in the single market.
Pierre Gramegna, who has been a public supporter of maintaining the EUâ€™s links with the UK financial sector, says Prime Minister Boris Johnsonâ€™s plans to rip up parts of the Brexit deal mean an agreement between the two sides is highly unlikely.
Mr Gramegna was speaking at the Association of the Luxembourg Fund Industry’s virtual conference this week after Mr Johnson received initial backing in parliament to change aspects of the EU withdrawal agreement.
Many critics say any changes would break international law and the EU has said the agreement is a â€śprerequisite for the negotiations on the future partnershipâ€ť between the bloc and the UK.
Mr Gramegna has previously said he hoped Luxembourg and the UK would still have a â€śfootbridge leftâ€ť after the UK formally leaves the bloc, but this is â€śin doubt right nowâ€ť.
Whatever the UKâ€™s motive, â€śthe likelihood that we will have a wide comprehensive agreement for the future relationship with the [UK] is obviously not anymore likely, so in other words, you should all prepare for a situation where […] the UK becomes a third country like any otherâ€ť, Mr Gramegna says.
UK firms with no presence in the EU currently will have to set up subsidiaries to continue operating in the single market after December 31, according to the minister.
â€śThey will not be able to work remotely […] they will have to have more presence, which means setting up subsidiaries and so on,â€ť he says.
The UK and EU have sought to secure an equivalence regime during Brexit talks to ensure that financial services firms can continue to access EU markets.
The deadline to reach an agreement was missed in June, raising fears that asset managers in the UK would have to access European markets through a diverse range of national-level rules.