Andrew Torres, founder of Toronto-based Lawrence Park Asset Management, has a more than passing interest in the upcoming referendum on whether Britain should leave or remain within the European Union.
Torres, whose firm manages about $500 million of client assets, is interested because of his connections: he was born there before coming to Canada in the early 1970s; he returned there about 20 years later to continue his work with TD Securities before settling in Canada in 2009; and because the on-going developments affect markets all of which make his day job and his ability to get ahead of developments in credit markets, all the more difficult.
More importantly he will have a say in the outcome. Torres, who founded Lawrence Park in 2011, will be voting on June 23. And the camp that favours Britain remaining in the EU will be getting his support.
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That support, he said, is based on “economic growth,” and the advantages Britain enjoys as being part of a larger economic group. One of those advantages is that while Britain is part of the EU, it does, unlike the bulk of the members, have its own currency, “which gives it more monetary flexibility as well as fiscal sovereignty.” In Torres’ view, the combination “of having full access to Europe and easy-going regulation has helped turn Britain into the financial centre of Europe.” If the vote in six weeks is to pull out, Torres said that financial centre role could be “under some jeopardy.”
That view, which seems to be the majority, has been supported by an OECD study. One week back the Paris based organization reported if Britain leaves, confidence would be hurt, uncertainty would increase and gross domestic product would be three per cent lower by 2020 compared with Britain staying — or GBP 2,200 per household. “The projected hit to living standards would amount, in effect, to a permanent Brexit tax on households,” said the OECD report.
Over longer periods of time the effect would be greater, said the OECD, because of damage to trade, investment and productivity, as the British economy suffered from the unrestricted access to the single market.
But Torres also detailed some the arguments against remaining in the EU. “It’s a grassroots argument,” he said, noting the no side is saying “that being part of the EU is taking British jobs, and opening up the border has created all kinds of problems,” with the numbers of people arriving from Eastern Europe.
Torres, whose firm welcomed CI Financial as a major shareholder in 2012, added the no side has also made some hay with the argument that rules that affect Britain are “being set by people in Brussels. It’s the sovereignty [argument] around Britain’s ability to control its own destiny.”
And Torres said the campaign is split on socio-economic lines with the working class being supportive of the view that Britain should pull out. “There’s almost a class divide between the elites who see the longer term economic benefits of remaining in an open trading bloc, versus the [working class] who see jobs being taken away.”
As for the outcome, Torres is a tad unsure as it all depends on which side is the most successful in getting its supporters to vote. “Ultimately it’s a case of how much of the populous vote gets out,” he noted. Meantime he has pared his exposure to British banks.