Ireland’s capital city Dublin, already an established English-speaking financial services hub, could stand to benefit as international firms look meet EU ‘passporting’ requirements in the wake of the Brexit vote. Gary Robinson visited the city recently to find out how locals view this and other opportunities
Ireland has a history of rebuilding itself, as has proven to be the case since the 2008 financial crisis, albeit not without some pain.
There are memories of the 1950s exodus of some half a million, with a similar story of several hundred thousand, many highly educated, who left in the 1980s. These demographic ripples, which saw young, educated people leave and the Irish economy stagnate, led to concern that 2008 could lead to a repeat and put Dublin in the doldrums for years. The unemployment rate rose from 6.5% in July 2008 to 14.8% in July 2012.
Fast forward eight years, and on the surface such danger appears to have been averted: to any visitor, Dublin in late 2016 could not be a more different place.
The Brexit vote has certainly galvanized discussion around opportunities, but when one walks around the financial district situated by the River Liffey – with its cool glass buildings, its hipster bars and restaurants situated in old quayside warehouses – there is a different feeling, perhaps one of a new city emerging from the past that is forging its own identity for the future.
Noel O’Halloran, director and chief investment officer at KBI Global Investors (KBIGI), pictured leftbelieves that Brexit will bring new opportunities, both for the city and for investors generally.
“When you look at Dublin, we have a small domestic economy in a small domestic market. Brexit was a shock and a threat, but it is also an opportunity. We run very balanced portfolios so it didn’t impact too much on those. But there is a feeling of opportunity.”
O’Halloran’s CEO and long time colleague at KBIGI Sean Hawkshaw agrees. Speaking from his firm’s headquarters located in the International Financial Centre district, he admits to having had to go prospecting in the international financial marketplace to grow the KBIGI business. Thus, the thought of that marketplace coming to his doorstep is an interesting one.
However, as Hawkshaw is quick to point out there is some way to go.
“Dublin is a centre for fund administration with EUR6.5bn in funds administered here,” said Hawkshaw. “It will be critical how UK domiciled funds and passporting is dealt with after Brexit as it could have a big impact but [at the moment] it is hard to say.”
“One thing we have seen advertising our positions [for new jobs at KBIGI] is that we have seen more CVs from the London market than we have seen previously. It is an interesting straw-in-the-wind indicator.”
With its more cosmopolitan feel, new bars alongside the spruced-up traditional establishments serving Guinness as a viable alternative to the Temple Bar stag and hen party drinking holes in the city centre, it is clear that Dublin is getting an image makeover of sorts to cater for more affluent clientele, both visiting and resident. There are still plenty of empty shops and offices to be filled but generally the look of the city is improving.
“Since Brexit we have seen office rents pushing up in Dublin,” adds Hawkshaw, pictured left. “On balance [Brexit is] a positive for Dublin but maybe not to the extent of the headlines you’ve seen. Competition exists from Paris, Frankfurt and other centres as well. Incrementally it will happen but probably at the margins and it is still very early to tell.”
The battle to lure financial services jobs and business away from London after Brexit is certainly beginning to intensify.
Dublin has been boosted with news that, in November last year, global financial clearing-house CME Group was reportedly to be particularly keen on a move to the city and examining options for a major operation headquarters.
CME, like many financial services and related businesses, is keen to ensure it keeps access to European Union customers after the UK leaves the bloc.
The Irish Times reported that managers at the Chicago-based derivatives exchange are weighing stronger ties to Ireland to ensure its London clearing operations are not disrupted.
Also in November, the German Federal Ministry of Finance said it had been fielding an increasing number of information requests from financial institutions in Britain considering a move to Germany.
Its financial centre, Frankfurt, is seeking to lure financial institutions from Britain, vying with Dublin, Paris and other European cities to attract business from London, Europe’s dominant financial centre.
Hawkshaw is not kidding himself that there will be a stampede of new business and firms flocking to the Irish capital after Brexit but sees the positives in having a less transient group of employees to choose from when making key hires.
“One of the positives of running an asset management team in Dublin is it is not the hotbed that is London or New York. Sure, it is a very small domestic market. But I think that you don’t have the same pressures in terms of staff turnover. It is an attractive place for people to come and work.”
“We’ve never had any problems attracting talent to Dublin. And when clients come here to visit or do due diligence on our business they like what they see and they like coming to Dublin as well. It is a good place to spend a little bit of time.”
Hawkshaw believes that London will continue to be a very important financial services centre and that considerations over moving to Dublin over the next 12-18 months will be spurred by the expected period of uncertainty of the UK capital’s status.
“It will probably be at the margins and be more middle and back office type of activities, so London will be fine I am sure.”
- In August 2016, Dublin was ranked the second most attractive European financial centre after London, putting it in a strong position to attract post-Brexit investment, according to report published by PwC.
- Luxembourg, Paris and Vienna ranked third, fourth and fifth respectively on the firm’s new “financial services attractiveness indicator”.
- The Irish capital could benefit from London losing its passporting rights, but this could be tapered if the UK retain the rights by signing up to a relationship with the EU similar to Norway’s, which would mean agreeing to free movement of labour.
In reality, most EU cities are a long way from joining the club of top-ranking financial centres according to the September edition of the Global Financial Centres Index, a closely followed annual study that is produced by two think-tanks, the Z/Yen Group in London and the China Development Institute in Shenzhen.
According to the GFCI, the world’s top five cities for financial business are London, New York, Singapore, Hong Kong and Tokyo. With global financial markets shifting their centre of gravity to Asia from western countries, five Chinese mainland cities as well as Taipei, Taiwan’s capital, figure in the index’s top 50 cities.
- US cities dominate the top 10. The list includes New York (second), San Francisco (sixth), Boston (seventh), Chicago (eighth) and Washington (10th). Other than London (first) and Zurich (ninth, but outside the EU), the only European cities in the top 20 are Luxembourg (12th) and Frankfurt (19th). Munich is 27th, Paris 29th, Dublin 31st, Amsterdam 33rd, Warsaw 45th and Madrid 68th.
A key reason is infrastructure and scale of existing operations. Dublin as an example, certainly has more space and empty offices than other European financial districts. But in a joke that alludes to London’s Canary Wharf financial district, a docklands development in Dublin is labeled “Canary Dwarf”.
The post-2008 Irish economic downturn, according to Wikipedia’s definition, coincided with a series of banking scandals that followed the 1990s and 2000s ‘Celtic Tiger’ period of rapid real economic growth fuelled by foreign direct investment, a subsequent property bubble which rendered the real economy uncompetitive, and an expansion in bank lending in the early 2000s.
An initial slowdown in economic growth amid the international financial crisis of 2007–08 greatly intensified in late 2008 and the country fell into recession for the first time since the 1980s.
Emigration, as did unemployment (particularly in the construction sector), escalated to levels not seen since that decade.
Ireland was the first state in the Eurozone to enter recession, as declared by the Central Statistics Office (CSO). By January 2009, the number of people living on unemployment benefits had risen to 326,000—the highest monthly level since records began in 1967—and the unemployment rate rose from 6.5% in July 2008 to 14.8% in July 2012. The slumping economy drew 100,000 demonstrators onto the streets of Dublin on 21 February 2009.
With the banks “guaranteed” and the National Asset Management Agency (NAMA) established on the evening of 21 November 2010, the then Taoiseach, Ireland’s term for prime minister (pronounced Tea-shock), Brian Cowen confirmed on live television that the EU/ECB/IMF troika would be involving itself in Ireland’s financial affairs.
In late 2014 the unemployment rate was 11.0% on the seasonally adjusted measure, still over double the lows of the mid-2000s but down from a peak of 15.1% in early 2012. By May 2016, this figure had fallen to 7.8%, according to Wikipedia statistics.