Ministers, Brexit negotiators and the Bank of England have warned the Prime Minister to brace herself as Paris plans to raid the sector.
A French-backed plan to limit UK-base fund managers’ access to EU money could force businesses to leave London and reduce the power of the City of London.
BoE and government officials fear squeezing out British companies could be the key to Paris’ bid to dominate the sector.
One member of Mrs May’s Brexit team told the Financial Times: “There has been a lot of focus on the impact of Brexit on investment banks, but this is becoming the key issue.”
Asset management firms are responsible for directing and investing clients’ cash to preserve and increase their wealth.
Under current “delegation rules”, it is possible to base a fund in one jurisdiction, but make all the decisions about the fund in another.
The most popular places to base funds are Luxembourg and Ireland, while funds are more typically managed in London, Frankfurt and Paris.
The UK’s Investment Association estimates £900bn in funds registered in Ireland and Luxembourg is managed from Britain.
Brussels does not want such a large proportion of assets located in the bloc to be managed by a third country, so could move to limit British access.
However if UK companies’ access to EU funds is reduced, asset management companies in London will find it much harder to fulfil their roles – meaning Paris can swoop in and scoop up clients.
British officials believe Emmanuel Macron himself backs moves to increase supervision of delegation decisions and make it harder for fund managers here to access money.
Keith Skeoch, head of asset management group Standard Life Aberdeen, said: “Any changes to the current delegation arrangements, however great or small, will have reverberations around the world.”
But the Conservative MP Jacob Rees-Mogg said the sector was not at risk – as any move to restrict third countries would start a row with “the US, Switzerland and other jurisdictions as well”.