“London is Europe’s most important financial centre whether we like it or not,” Marc-André Bechet, director of legal and tax at the Association of the Luxembourg Fund Industry, told Delano. “It has many experienced experts in portfolio management and associated service providers.”

The problem is that the UK cannot be out and in at the same time, he added. “The UK cannot be out of EU and maintain the same rights as when it was a member.” 

No matter what (if any) kind of deal is agreed, as soon as it leaves the EU, the UK will automatically become a “third country”, and, according to Bechet, this is making some of the EU27 very uneasy

“Given the size and weight of the London financial centre, some EU countries are worried about the level of influence it may still have when the UK leaves union,” he explained. “They don’t want a third country having enough influence to drive other EU economies.”

Enhanced equivalence is currently being negotiated as a framework for EU/UK business relations post-Brexit. “But this has never been done before,” said Bechet, “it is a real Pandora’s box and we need to wait and see what the outcome of negotiations will be.”

However, “wait and see” is exactly what the asset management industry is not doing. “30 to 40% of UK asset managers, and foreign asset managers using the UK as a European base, have made up their minds on Brexit and have already taken action.” And here, Luxembourg is faring well.

Although it is not the grand duchy’s policy to hover around looking to snap up Brexit scraps, its third-party management company structure is proving to be very attractive. “Third-party management companies are a huge asset for Luxembourg. They provide the necessary structure, expertise and substance that allows asset management companies to move or reinforce their European presence relatively simply.”

“Also,” he added, “Luxembourg and London have been working together in this way for many years, so it’s not like we are reinventing the wheel.” By that he means that Luxembourg has been providing fund servicing to London’s asset managers for a long time and is perfectly placed to pick up the pace after Brexit.