Financial companies won’t cluster in single city after Brexit - Lane
Central Bank governor says no single European location is sufficiently predominant
Banks won’t cluster in one place post-Brexit. Photograph: Bryan O’Brien/The Irish Times
Financial businesses such as banks are unlikely to cluster in a single European location post-Brexit, Central Bank governor Philip Lane has said, adding that no single city is sufficiently predominant.
In a speech at the Certified Bank Director Annual Conference in Dublin, Mr Lane again flagged Brexit as being a “key risk” to the State’s financial resilience.
“While recognising the positive baseline forecast, the intrinsic volatility of the Irish economy means that there can be sudden and sizeable adverse shifts in fundamentals,” he said, adding that it’s hoped a more resilient financial system will be better placed to absorb the impact of future downturns.
“In this context, as you will all be aware, a key risk is Brexit,” Mr Lane said.
The Central Bank governor said Theresa May’s withdrawal agreement, which sets out the post-Brexit relationship between the EU and the UK, would lead to the introduction of trade “frictions” such as regulatory checks and restrictions on the free movement of people.
“Beyond the implications for individual citizens, restricted labour mobility will also affect the dynamics of different industries (including the financial sector) in the coming years,” Mr Lane said.
“For instance, the productivity boost from the clustering of specialised talent pools in specific locations will be undercut by the geographical dispersion implied by restrictions on labour mobility. It will also affect relative business cycle dynamics, given that UK-EU27 migration serves as an adjustment mechanism in response to asymmetric shocks.”
Mr Lane also detailed the likely results of a hard Brexit, saying it would generate sharp movements in asset prices and the sterling-euro exchange rate.
“The next few weeks and months will tell us much about the future EU27-UK relationship: however it turns out, the Central Bank of Ireland will be focused on the resilience of the financial system, in order to mitigate the adverse impact of Brexit (whether hard or soft) on the Irish economy,” Mr Lane concluded.