This year promises to be a watershed one for the country’s financial services industry.
THERE HAS RARELY been a moment of greater opportunity for the Irish financial services industry.
With the legacy issues of the financial crisis now largely behind us, 2017 has been a very positive year and puts Dublin in position to move into Europe’s premier league of financial centres in 2018.
Here are five key takeaways from a very eventful year, together with a few predictions:
1. Brexit will be a slow burn rather than a big bang
As Brexit has unfolded since June 2016, there has been an undercurrent of disappointment in some quarters that the flood of finance jobs they had expected has not yet materialised.
This is to misunderstand the likely impact of Brexit on our financial sector. First, there is still no clarity on the length of the transition period and the future trading relationship between the UK and the EU.
Second, most UK-based firms don’t want to move and will only do so when they have to. Finally, a steady flow of companies have already announced their intention to locate here.
We can expect more as we move into 2018 and the need of UK-based financial services companies to mitigate any change in ‘passporting’ status with the EU becomes more pressing as the Brexit deadline looms into view.
When Phase 2 of the EU-UK negotiations kick off, it should soon become clear to the industry that a long transition, followed by a free trade agreement that excludes financial services, is the most likely outcome.
A hard Brexit for financial services will ensure that more activity continues to flow to Dublin and other financial centres like Paris, Amsterdam and Frankfurt, with a greater likelihood that the ECB will ultimately insist that risky activities like trading are regulated within the EU.
Dublin is now in pole position to make the most of this game change.
2. A back office no more?
Some of the initial scepticism around our ability to absorb Brexit jobs was based on a perception in London and elsewhere that Dublin is a giant back office with very limited activity and availability of talent in higher value front office operations.
Whether or not this was true in the past, it certainly isn’t anymore. Earlier this year, Dublin was ranked fourth among eurozone financial services centres, according to the latest Z/Yen Global Financial Centres Index.
The roles and activities that we now see coming on stream in Dublin are predominantly in higher-value areas like risk, trading, investment management and technology – the financial equivalent of senior hurling, you could say.
3. European talent has Ireland on its radar, but we need to be more attractive
While Brexit has forced financial institutions to consider their future location, it has also triggered a search among talented European professionals for the best place to grow their careers.
We learned earlier in the year that almost half of Britain’s highly skilled EU workers are considering leaving in the next five years.
Increasingly they see Dublin as a serious alternative, with Indeed reporting that the Republic’s popularity among European jobseekers has surged by more than one-third, while IMD’s world talent ranking placed us fifth in the word in terms of our ability to attract overseas talent.
However the fly in the ointment is our quality of life. Anyone who lives here knows all about the housing squeeze, poor public transport and long commutes.
And increasing numbers of Europeans do too, with the recent Expat City Ranking 2017 finding that Dublin was the second-worst major European city in terms of quality of life, just ahead of Paris.
Worryingly, our major competitor Amsterdam ranked in the top five, although it also has its own housing shortage.
So while we rank highly for career opportunities and being a welcoming place to relocate to, the high cost of housing and low take-home pay once our high personal taxes have kicked in are becoming a real drag on our ability to attract and retain people here.
Another reminder that the government needs to keep prioritising personal tax reform and increasing the supply and affordability of housing as key elements in our strategy to make Dublin a more attractive location for the cream of European talent.
4. Not everyone is playing by the rules – but we have no choice
There was disappointment earlier in the year when insurers AIG and Lloyds opted for Luxembourg and Brussels rather than Dublin for their new EU subsidiaries.
Of more concern was the given reason in both cases: that greater ‘regulatory flexibility’ was available than in Dublin.
This coincided with concerns expressed by a number of financial companies looking at relocating here that the Central Bank was less engaged than other EU regulators in addressing their queries.
While the ECB was adamant that the relocation of London-based financial companies should not be an opportunity for a ‘race to the bottom’, the reality is that there were clear signs of a deliberate regulatory approach from certain other member states, who are keen to deliver the greatest possible Brexit dividend for their financial centres.
Ultimately we should just shrug our shoulders about all of this. It is still less than a decade ago that this country was brought to its knees by, among other things, the same ‘regulatory flexibility’ and a financial regulator that was asleep at the wheel.
Those who lived and worked through the consequences need only two words to convey their feelings on the matter: never again.
So even if the more rigorous regulatory approach of the Central Bank means that we lose some potential investments at the margins, it is a price worth paying.
5. Losing the European Banking Authority was no big deal – coming joint first was
Our remarkable performance in getting to the final round of the competition to host the relocating European Banking Authority ended in bitter disappointment as we lost out to Paris by the drawing of lots.
However we really shouldn’t beat ourselves up too much about this particular result. After all, the EBA is a minor player in the EU’s financial regulatory infrastructure and there weren’t that many jobs in prospect.
What is far more important and revealing is how far we got in the first place. While some reports framed it as a Brexit sympathy vote, it was in reality evidence of a remarkable comeback for this country.
Going from the financial and fiscal laughing stock of the EU in 2011 to pipping Frankfurt and only losing out by the drawing of lots six short years later must surely rank as one of the most remarkable recoveries of national reputation in modern history.
All the more reason to not to risk it again for some short-term regulatory flexibility.