IRELAND is open for business in 2017 – and eager to take advantage of the fallout from Brexit.
That’s the clear New Year message from a trio of big hitters - the Irish government, IDA Ireland and the National Treasury Management Agency - who are convinced that Ireland can capitalise on the UK’s decision to leave the EU, by attracting further foreign direct investment and by targeting the financial services companies abandoning London.
Finance Minister Michael Noonan has confirmed that there is ongoing interest in Ireland, and says the government wants investment that will bring jobs and create investment here.
“It’s very simple,” says Pegasus Consulting MD John O’Keeffe. “The UK-based multinationals, especially financial services, fear that, after Brexit, their fund houses will no longer be able to sell their products from London. They want to maintain access to the EU’s single market – and Ireland is an obvious, EU-based, business-ready, English-speaking alternative.”
Major investment banks such as Goldman Sachs and Credit Suisse are amongst those looking to invest inside the euro area, said the Pegasus chief, who is advising a number of international companies on their response to Brexit.
The Central Bank has confirmed its officials have met a number of financial services firms which are examining re-domiciling in full or in part from the UK to other EU countries.
There has also been a huge increase in applications for Irish passports from British nationals.
Junior Finance Minister Eoghan Murphy, who is in charge of financial services, has also confirmed that there is “significant interest” in Ireland from major firms and banks looking to relocate. “We are managing that interest on a daily basis. There are opportunities here for Ireland and it’s in the national interest that we grab them and we will.”
IDA Ireland CEO Martin Shanahan agrees: “While not what we had hoped for, the situation may present opportunity for Ireland in attracting foreign direct investment. “Ireland will remain a member of the European Union with full market access and that will be attractive to investors.”
Speaking to Silicon Republic, Mr. Shanahan said that IDA Ireland is liaising with its 1200-plus client companies and potential investors, working with them on the implications of the Brexit vote. He also pointed out that Ireland’s advantages for inward investment will continue to resonate with foreign investors. “Our deep and varied talent pool, competitive and consistent tax regime and long track record of working with foreign companies is something that companies are interested in. The fact that Ireland is English-speaking and a member of the EU and Eurozone is also attractive. As we have always done, IDA Ireland will continue to market Ireland across the globe as the No 1 location for foreign direct investment.”
The Minister of State for Financial Services, Eoghan Murphy, adds: “The result of the UK’s referendum brings opportunities and Ireland’s IFS sector can capitalise on investment opportunities in this environment. We have a highly educated workforce and a business-friendly environment, as well as being an English-speaking economy in the euro zone.”
The government, in particular, is targeting financial services companies who may wish to relocate their EU base from London to Ireland. The International Financial Services strategy (IFS2020) provides a “clear roadmap” to maximise Ireland’s ability to attract financial services companies from London as a result of Brexit, the minister told a conference in Dublin in late October. “There will be opportunities for Ireland arising from Britain’s decision to leave the EU. We will seek to take those opportunities, many of which already form part of the IDA’s marketing strategy.”
IFS2020 seeks to create 10,000 net new international financial services jobs here within five years – on top of the 38,000 people already employed across 400 Irish and multinational companies.
FDI directly and indirectly accounts for one-ﬁfth of private sector employment in Ireland. It also makes a signiﬁcant contribution to the Irish economy. IDA clients directly employ 187,000+, spend €9bn on payroll annually, invest €1.5bn in R&D and account for 67% of national exports and 65% of corporation tax.
A recent Grant Thornton briefing identified a number of potential opportunities for Ireland presented by Brexit, including:
- Ireland is about to become the only native English-speaking countries in the EU
- UK-based companies may look to Ireland for a base to maintain an EU presence
- Ireland provides a similar economic and cultural landscape to the UK
- International HQs may move from the UK to an EU jurisdiction, to allow them continue to “passport” their financial services
- This is an opportunity for Ireland to develop EU and other markets and reduce reliance on UK market
- It may be possible to actually strengthen our trading terms with the UK, renegotiating with Ireland inside the EU, and the UK out.
Grant Thornton argues that Ireland now needs to market itself as the obvious jurisdiction for new business and re-locations. They also recommend a detailed review of our existing investment incentives, and that all requisite government agencies – Revenue, Central Bank, CRO – need to prepare to deal with the added workload. Ireland will also need to take the opportunity to improve its infrastructure – with office space, schooling, transport and housing top of the agenda.
Finance Minister Michael Noonan, meanwhile, has insisted that Ireland only wants to attract companies who will create jobs here. “We don’t want brass plate operations that simply come here and screw a brass plate on to a door for tax advantages and don’t have the strong economic activity here that creates jobs, we don’t want that,” Mr Noonan told reporters in late November, at a Department of Finance tax conference in Dublin Castle.
Even before the Brexit result, The Irish Times was reporting that the Irish Central Bank has begun preparations for an influx of investment managers, amid fears that fund houses will no longer be able to sell their products from London. Gareth Murphy, director of markets supervision at the Central Bank of Ireland, which oversees more than 6,000 funds, said fund companies will want to maintain “a foothold” in the EU.
Ireland’s National Treasury Management Agency recently published a report entitled “Brexit and its Impact on the Irish Economy”. These are its conclusions:
“The City of London will remain a global centre for finance in the event of an EU exit but some activity may be lost. Its central role in foreign exchange trading, securities trading, insurance, asset management, financial law, and accountancy services is likely to continue. Some activity could be lost as institutions relocate for reasons related to the EU market. If that activity were to be relocated to Dublin, it would be a strong positive for Ireland.”
According to the NTMA: “The reasons for relocating are based on access to the single market, regulation and skilled labour. If the UK was outside of the single market, London would not be able to service European financial markets quite as efficiently. Non-EU financial institutions may seek a new bridgehead from which to service the EU market. Banks from outside the EU would no longer be free to set up a subsidiary in London and then branch out to other EU member states. They may look to Ireland as one of the logical places to consider for relocation of their EU base. This would be an opportunity for the IFSC especially given Ireland would be the only English-speaking country left in the EU.”
After a Brexit, the NTMA suggests the UK might find itself in a similar situation to that of Switzerland in terms of regulation. “Swiss financial institutions only have limited access to the EU. To sell services to EU customers, they must set up branches and subsidiaries inside the union. To maintain access these subsidiaries need to comply with EU regulation and so must continuously update their regulations. To maintain the City’s market access and the UK’s more generally, the withdrawal agreement would likely stipulate the UK would need to do something similar. If market access was restricted, it would open up further relocation possibilities for Ireland.”
Pegasus Communications is advising a number of clients, in Ireland and the UK, as they prepare to respond to Brexit. If your company would like to be added to our network, contact us, in strictest confidence, at… firstname.lastname@example.org