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Over-Cautiousness and Mixed Messaging May Hamper Ireland’s Financial Services
Political and economic affairs in the UK, USA and on mainland Europe suggest that 2017 and the period beyond will be a time of volatility and unpredictability.
In difficulty there is opportunity. In the immediate aftermath of the Brexit referendum, many UK-based multinationals in the financial services sector signalled their interest in moving part or all of their existing and future operations to maintain access to the EU’s Single Market using the ‘financial services passport’. The potential windfall for this country, in terms of revenue and job creation, is unprecedented.
Perception matters, however. Consider our closest neighbours: there has been ongoing criticism of the British Government’s preparedness for Brexit and its post-EU future. Irrespective of whether this criticism is warranted, Downing Street has seemingly done little to reassure businesses and investors of the potential opportunities ahead. We risk falling into the same trap when wooing international banks and other financial institutions seeking certainty in the Brexit fallout.
We have to make sure that we are doing everything possible to demonstrate that Ireland is open for business. We need a highly visible strategic plan that sells our strong workforce, enterprise-friendly government and our excellent, decades-old track record of providing an ideal home for financial services,which the Central Bank has been at the heart of.
Despite the good progress made in this area, like Minister Eoghan Murphy’s recent trade visits to Asia and the United States to drum up post-Brexit FDI, emerging mixed messages risk undermining the process.
International businesses considering a move to Ireland are performing their due diligence. Regulation takes time, and reasonable people know that. But any perception or ‘talking down’ of the country’s capacity to cater for these companies may rattle key decision-makers. A recent Reuters report said that many in London perceive Dublin’s attitude as “one of caution”; in it, a source at a global investment bank said the Central Bank’s appetite for major financial institutions appeared “not that high”, while another claimed a lack of specialist regulators and supervisors here was an issue. Such commentary would feature in any due diligence.
It is particularly vital that the Central Bank is given the necessary resources, both in terms of funding and personnel to deal with Brexit challenges. It is also important that the Central Bank at all levels makes it clear that it is in fact willing do business with any financial institution looking to move from the UK where they are willing to establish a real presence here.
Time is of the essence. Government, regulator and industry must work quickly and in tandem to assuage any doubts. A clear plan, supported by a joined-up and consistent message of positivity that champions our country’s openness to business is paramount.
Following the British Chancellor’s announcement that the UK’s corporation tax will fall to 17% by 2020—making it the lowest rate in the G20—the importance of Ireland being on the front foot cannot be overstated.
The stakes are high and competition is tough. It would be mistake to think that Ireland is the only candidate for relocation. Paris, Luxembourg and Frankfurt, to name three, are competing strongly to attract these mobile businesses and their governments have launched formidable charm offensives to that end. France, Luxembourg and Germany have their own highly skilled workforces and they should not be underestimated.
Ireland is a major player in international financial services, and we can achieve more. We must be careful not to squander our opportunity.
Irish Independent, 24 November 2016
Joe Beashel is a partner in the Financial Institutions Group of leading Irish law firm, Matheson.