A view that has been gaining currency in recent weeks is that the UK could follow the Swiss financial services model, a country that has thrived outside of the EU.
However, Smith believes that Switzerland’s relationship with the EU could not be replicated, and that evolving legislation could push financial services activity towards the continent if the UK votes for Brexit.
Of particularly relevance is his view that the UK asset management industry – with assets under management totalling £6.2tn in 2013 – is likely to suffer should Brexit occur.
“Under the EU’s Ucits directive, collective investment vehicles, such as unit trusts, are permitted to be sold across the region on the basis of authorisation from one member state,” he said.
“The regulatory burden on the UK fund management industry outside of this special zone would be severe, and it is highly likely that many European or international fund houses currently choosing to headquarter in London would move at least part of their operation back to the mainland.”
Would the UK’s budget balance improve substantially if it was to leave the EU?
It is true that the country would be around £9bn better off in the current tax year if it did not have to make contributions to the EU.
However, Smith believes that at least two-thirds of this saving would probably be eroded by associated losses and compensatory domestic public expenditure.
“Perhaps the greatest risk to UK finances is that Brexit would create uncertainty, which could, by itself, reduce growth,” he said.
