Boutique research providers’ business models are coming under increasing pressure two years on from the introduction of EU markets rules, in what an industry association describes as an “existential threat” to the sector.

Mifid II, which forced asset managers to split the cost of investment research from that of trading securities for the first time, has provoked a revolution in the research market place. Fund groups under pressure to control their costs have pared research budgets, while big investment banks have slashed prices to protect market share.

Euro IRP, a trade body for European research providers, said the drastic reduction in buyside research spend and the cut-throat price war under the new regime were creating a “perfect storm” for boutique research houses.

The majority of providers surveyed by Euro IRP reported flat or declining revenues in the past 12 months. Independent boutiques, which rely almost entirely on the sale of research to survive, have been forced to reduce their pricing in response to the new environment. Nearly two-thirds of providers said they had cut prices in the past 12 months, with houses’ average annual fee falling from $45,000 to $30,000.

The bleak outlook for independent providers comes shortly after the UK regulator dealt a blow to the sector by dismissing concerns that banks’ aggressive pricing , some are reportedly charging as little as $10,000 annually for access to all written research, was creating unfair competition.

The tough environment has already resulted in some consolidation among independent groups. Rothschild this year purchased a significant minority stake in Redburn, the research-driven broker, while AllianceBernstein bought UK research boutique Autonomous this year.

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