Giuseppe Leppi Analyses Post-Brexit Situation

The expert reminds that the agreement postponed the regulation of financial services to a later time, creating obstacles for cross-border activities. “Now we can only provide advisory on structured products with UK clients

Even after the last-minute agreement reached on Christmas Eve, Brexit remains a significant concern for the asset management, wealth management, and financial services industries. While the threat of a hard Brexit has been avoided, questions persist about the future relationship between the UK and the EU, particularly in the financial sector. “The agreement, though complex, only addresses commercial issues, ensuring no tariffs or quotas are imposed, but legal and financial uncertainties remain,” explains Giuseppe Leppi, Managing Director and Head of CFE Finance UK, a niche investment banking boutique specializing in credit strategies.

Despite the UK’s dependence on financial services, the issue has been postponed, with a Memorandum of Understanding to be finalized by March. As of January 1, 2021, UK and EU businesses lost their mutual passporting rights, facing limitations on cross-border activities. There’s also an ongoing issue regarding the flow of personal data, which many financial firms rely on. “The City has been negatively impacted,” Leppi notes, citing that the European market accounts for a quarter of the City’s annual financial services revenue. “The issue will be addressed in February or March, but the problems remain. Financial firms have already moved 7,500 employees and £1.2 trillion in assets to the EU,” he adds.

Regarding UK products sold to Europeans and vice versa, the sector is currently at a standstill. “At CFE Finance, we can only provide advisory on structured products with UK clients,” Leppi explains. He had hoped the government would take stronger action to protect finance and the City, but that hasn’t happened. “The issue must be resolved for everyone’s benefit. Most asset managers are British, and all the major investors in European funds are British. Delaying a financial agreement isn’t wise,” he states. Additionally, the push for greater European competition in wealth management, family offices, and fintech has been hindered by the pandemic, which has forced a delay in such ambitions.

On trade, despite the absence of tariffs and quotas, customs checks are expected, leading to additional documentation and paperwork. “This documentation may pose a challenge, but I believe the trade system will remain advantageous for countries like Italy, with £10 billion in imports and £25 billion in exports with the UK,” Leppi comments.

Regarding economic and market effects, Leppi anticipates the UK economy will face challenges from the new lockdown, similar to Italy’s first wave of COVID-19. A recession is expected, continuing the downturn seen in the last quarter of 2020. “At the moment, it’s not Brexit but the pandemic that dominates,” he explains. “I’ve exited my long positions on the pound against the dollar and euro, and we’ll need to see how countries respond to the pandemic, how vaccinations progress, and how the economy reacts, particularly to the financial agreement.”

Leppi expects a battle for financial supremacy in Europe. He finds it interesting that the UK government is focusing on green finance and impact investing.

FocusRisparmio, 19 anuary 2021