Special Report

Dublin must rise to the challenge of Brexit

The city must remain competitive and put key infrastructure in place to continue to attract investment

 

“Alea iacta est.” Thus spake Julius Caesar as he led his armies across the Rubicon river in northern Italy to march on Rome and do battle with Pompey. It means “the die is cast”, and for Caesar and his armies, it signalled that once they crossed the Rubicon, there was no going back, and they were going to have to commit 100 per cent to their mission – or end up 100 per cent dead.

Theresa May has crossed that Rubicon, and there’s no going back now for the UK. The British prime minister has pulled the trigger on Article 50, and the mechanism that will take Britain out of the EU is now grinding inexorably on its way to dismantling the institutions and agreements that have been in place over the past 40 years. The die is rolling, Brexit is happening, and what’s going to happen next is anyone’s guess. 

Whether you think Britain is shooting itself in the foot, or shooting the starting gun on a new era of economic independence, there are serious implications for Ireland in the aftermath of Brexit. Although we will surely benefit from international firms seeking to relocate from London in the wake of Brexit, we also face losing a lot of direct business from the UK – still our biggest trading partner – due to the inevitable imposition of tariffs, increased export/import costs and the weakening of sterling. Our business relationship with the UK will change, and it will be up to us to manage that change.

And while many international firms will look to move their European offices out of London to maintain relations with the EU, they may not automatically hop across the Irish Sea and set up in Dublin. The capital is going to be competing with the likes of Paris, Frankfurt and Amsterdam in its bid to attract business, and we’re going to have to pull out all the stops to ensure they make Dublin their preferred stopping place.

“We have to keep ensuring that our capital city remains competitive and that it is an attractive and desirable location to live and work,” says Minister for Jobs, Enterprise and Innovation Mary Mitchell O’Connor, who has been working closely with the IDA to ensure Dublin can continue to attract foreign direct investment in the aftermath of Brexit.

‘International business’

IDA Ireland already excels at attracting international business to all parts of Ireland, including Dublin, and that will continue to be its key task,” says the Minister. “We need to look everywhere – at all corners of the globe. IDA Ireland is continuously working to ensure that prospective investors – on every continent – are aware of why Ireland remains such a good country in which to invest.”

Although the IDA’s focus is on attracting foreign companies into all parts of the country, there will be an emphasis on Dublin as the “front office” to the rest of Ireland, and it will be important to highlight Dublin’s strengths if it’s going to compete against other European cities in the battle to convince multinational companies to set up here.

One of the key tasks facing Dublin is to upgrade its infrastructure to make it ready for business and fit for purpose. The Government’s Capital Investment Plan, published in September 2015 by the Department of Public Expenditure and Reform, outlined a €42 billion framework for improving infrastructure from 2016 to 2021.

“We need to keep investing in our infrastructure,” says Mitchell O’Connor. “That means providing housing and office accommodation, transport links, broadband, water and all the facilities and services that the best cities in the world offer.”

“We need to have ambition, and show we’re ready to do business,” says Graeme McQueen, public affairs manager of Dublin Chamber of Commerce. “The capital plan is a good one, but a lot has changed since it was written two years ago.

“Housing is a big thing – where are families going to live in the next few years? What I’m getting from our members is that we need to sort out Dublin’s congestion – better transport. Get the metro-north line going, put the underground back on the table. We need to have the political will, and politicians need to act on their promises.”

“We need to continue our capital programme on infrastructure. That’s a fundamental,” agrees Alan Murphy, European chairman of Eversheds Sutherland, which provides legal services to companies around the globe – and provides expert advice in managing the implications of Brexit.

“Dublin airport has made a lot of strides forward. It’s now up there as one of the hubs in Europe. There are a lot more passengers routing through Dublin. But we need to continue to develop the airport, we need a public rail link to the airport, we need to continue to improve our road structures, and we need to continue to invest in housing and education facilities for people who are working here.”

Dublin’s infrastructure

The good news is that work on Dublin’s infrastructure has been going on. The new Luas line linking up the north and south of the city centre is almost complete, and the new €320 million runway for Dublin Airport, which was stalled by the recession, has finally been given the go-ahead.

“The airport has really taken the lead and shown it is ready to move as the economy improves,” says McQueen.

While upgrading our infrastructure will be an ongoing project over the next few years, the immediate task will be to highlight Dublin’s existing strengths as a place to locate businesses, and in that regard the capital has a lot to offer, says Mitchell O’Connor.

“Dublin is a city with deep historic and cultural traditions that is also now an innovative, hard-working, dynamic European capital city,” she says. “In specific terms, Dublin’s strengths are those of Ireland. The IDA highlights these all the time and they are our talent pool, a proven track record for FDI, our competitive and transparent tax regime, our positive demographics, a first-rate education system and an ever-improving infrastructure.”

“Dublin’s track record is really important. We would see Dublin as a very successful place for FDI,” says Mary Buckley, executive director of the IDA. She points to the clusters of science, technology and finance companies already in situ – more than 750 overseas companies in the mid-east region, encapsulating Dublin and the necklace of counties around the capital.

“As a country we have opened our borders, so currently there’s access to a population of 500 million across the EU, and that’s very important for attracting talent. We’re seen as a very stable country. If you see what’s going on politically around the world, there’s a lot of uncertainty there, and that’s not good for business. Companies like certainty, and Ireland provides certainty. And we have pro-business policies which work very well.

“Critically important is our membership of the EU. It is a huge advantage and we have to keep highlighting it.”

A recent report from the IDA shows that overseas companies in Ireland employ almost 200,000 people, and that 2016 was the IDA’s best year in its 70-year history in terms of foreign direct investment, with a record 244 investments secured, up from 213 in the previous year.

“But we can’t be complacent about that,” cautions Buckley. “That’s where competitiveness kicks in, and having not just infrastructure but skills, and continuing with our pro-business policies. The ecosystem has to be right. And the ecosystem is good in Dublin. The growth of tech companies has been phenomenal. This year alone we have seen Microsoft announcing 600 new jobs in Dublin. Indeed. com have announced 500 new jobs in Dublin.”

“One of our strengths is that we already have a cluster of companies established here – these companies are here to stay and happy to do business in Ireland,” says McQueen. “We need to highlight why these companies are here. I don’t come from here – I’m from Scotland – but Dublin is a great place to live and work. There’s a good standard of living here, our education system is good, and we’re turning out talented graduates.”

“For me our biggest strength is our talent, our young people,” says Murphy. “I think we have a really strong cohort of talent in this country, and they’re well-educated, they’re energetic, they’re dynamic, they’re hard-working and they’re very European in the way they look at life.

“We are young Europeans and we believe in Europe and we believe in the union, and I think that’s a strength we’ll have in the context of Brexit.”

Low corporation tax

It helps, of course, that we have a low corporation tax, but Murphy insists we should not let that turn us into a one-trick pony.

“We have to emphasise the other reasons why companies are doing business in Ireland and why they’re setting up in Ireland. It’s not the only factor – I think we have a lot of other strengths going for us.

“We would have a very well-crafted and user-friendly regulatory regime compared to other jurisdictions. If you looked in the area of funds, in which we have a strong presence in Europe, it would be a fit-for-purpose, user-friendly regime.

“We are also a common-law jurisdiction, which is very important for some organisations. So companies understand our legal system more instinctively than they might in other jurisdictions, because it’s what they’ve been used to.

“Also there are the obvious ones: we are the only English-speaking country left in the EU, and Dublin is a very nice place to live. I have an international role and I visit many countries, and I know that Dublin is a really nice place to live, easy to access. It’s hugely enjoyable to visit different cultures and see how things work in different jurisdictions, but I always come back to Ireland and get that bit of buzz and energy and the youthfulness and the sheer ability we have in the city of Dublin. I take faith from that.”

“Ireland is a small country – it’s easy to network, it’s easy to connect, it’s easy to meet people and to engage,” says Buckley. “And there are synergies in that, with clusters of companies that like to be in close proximity to similar types of companies. You see it in Dublin with the tech clustering in the centre of Dublin. A lot of networking, working together, meeting and engaging – that’s very positive stuff and you can do that in Ireland.”

In the weeks following the UK’s referendum vote to leave the EU, the New York Times suggested that London’s days as the pre-eminent global financial capital were numbered, and wondered which city would be the best candidate to take on the mantle. The newspaper ranked Amsterdam as the city best placed to take advantage of the opportunity posed by Brexit, and ranked Dublin in fourth place, behind Frankfurt and Vienna. But though we scored highly on the New York Times’ “best place to relocate” charts (let’s face it, that’s a lot better than we’ve done in recent Eurovision song contests), can we punch above our weight and aspire to being a global financial hub?

“Yes, I believe we can,” says Mary Mitchell O’Connor. “The global companies that have chosen Dublin as their European home are testament to that. We must be constantly scanning the horizon to see what competitor cities and locations are offering and ensure that Dublin matches and exceeds these.”

“Ireland is already very successful for its size in terms of financial activities,” says Mary Buckley. “Not just in Dublin – there’s a lot of financial services activities around the country: Northern Trust in Limerick; there’s State Street in Kilkenny; Fidelity Investments in Galway. So it’s not just Dublin, but that front-office activity is very much conducted from the IFSC, which was established in the late 1980s, and is very successful, and continues to be so. There are about 35,000 employed in the IFSC alone. And we have the potential to win more business.”

One of the sectors facing a big challenge in the wake of Brexit is retail, which has already suffered major body blows from recession, high rents and rates, and the unstoppable growth of online shopping. Add to that the devaluation of sterling, which will impact on Irish retail sales, and the prospect of fewer Britons making the trip across the Irish Sea to flash the cash.  

“We need to be inventive, and think outside the box,” says Lorraine Higgins, head of public affairs and communications at Retail Excellence Ireland. “We’ve had a cosy relationship with Britain which has been brutally broken. We’ve been tied culturally and economically, but now we’ll have to forge alliances with other cities. We’ve been working with Fáilte Ireland and the Northern Ireland Tourist Board to work on ways to promote our retail offering to tourists.”

Irish retail brands such as Kilkenny Design and Avoca have a strong international reputation, but many lesser-known Irish retailers need to get a foothold on the biggest shop floor around – the internet. With Europeans spending €600 billion on online shopping in 2016, it’s vital that Irish retailers beef up their online presence, and make it easier for customers abroad to order and pay for their products online.  

“Every hour, €850,000 is spent online in Ireland, and 70 per cent of that goes to businesses outside the country,” says Higgins. “Irish retailers need to get a slice of that online spend.”

“Our competitiveness is key, and we can’t be complacent about that. It will be important for Ireland as a whole and Dublin in particular,” says Mary Buckley.

“Ireland has been through some bad times,” says Graeme McQueen. “There’s a lot of uncertainty, but I would be optimistic that Dublin can rise to the challenge.”

“Brexit is an enormous challenge, there is no doubt about that,” says Mary Mitchell O’Connor. “It is about mitigating risks but also maximising opportunities. I am an optimist. I see Dublin finding new opportunities and prospering from them.”