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UK asset management risks losing competitive edge

Fund managers are concerned the UK could be losing its competitive edge as an international hub for the asset management industry, according to the latest research.

The new Asset Management in the UK 2010-2011 survey, which was conducted by the Investment Management Association, shows just 14 per cent of respondents say the UK improved as a place to do business last year.

The regulatory environment is one of the major worries facing fund managers, with 70 per cent saying this is their greatest concern at the moment. Regulation which is seen to be “disproportionate or wrong targeted” include the original proposals for the Alternative Investment Fund Managers directive, the early forms of the remuneration code and the changing capital requirements for asset management companies.

In addition, the survey shows managers are concerned by the unintended consequences of rapid regulatory change in the UK, the potential lack of international coordination and the manner in which regulatory oversight is exercised.

Fund managers also claim the traditional advantages of the UK have been eroded over the past few years, with the influence of factors such as scale and time zone starting to diminish.

Technological advances are encouraging inter-connection in the asset management industry and reducing the ’cluster’ advantages of the UK, the research finds, while international labour market flexibility is allowing companies to operate in different time zones with greater ease.

“Combined with concerns about the predictability and the need for policy change that is seen as durable rather than arbitrary, all of this is leading firms to emphasise the importance of an ongoing proactive effort by the UK authorities,” the report says.

“This would involve an unequivocal signal that the UK is ’open for business’ and will fight to retain its pre-eminence as an international financial centre.”

The survey also shows the actual number of asset management workers who are relocating outside of the UK remains relatively small. However, it adds that the issue is becoming “a reality”.

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