More than 35 London financial firms eye Dublin switch

Ireland seen as attractive alternative post Brexit vote given similarities with UK structures

 The Irish Financial Services Centre: academic Jim Stewart said Ireland’s financial centre had hosted many of the vehicles involved in the  crash and  it used “smoke and mirrors” to “camouflage” some activity.  Photograph: Matt Kavanagh.

The Irish Financial Services Centre: academic Jim Stewart said Ireland’s financial centre had hosted many of the vehicles involved in the crash and it used “smoke and mirrors” to “camouflage” some activity. Photograph: Matt Kavanagh.

 

Irish officials say they have had more than 35 concrete enquiries from London-based financial groups looking at setting up a base or expanding in Ireland following the Brexit vote.

Dublin is one of a handful of European cities trying to draw business away from Britain’s financial centre.

“Post-Brexit, it’s meant a lot more meetings, more phone calls and a lot more travel,” said Eoghan Murphy, Minister of State for Financial Services. “I’m in daily contact with different players in the industry.”

Ireland is trying to woo companies with the offer of a contracting entity, a legal toehold on the island that could be expanded when Britain leaves the EU, allowing them to keep the same access to the European market.

Businesses are being courted by other financial centres including Frankfurt and Paris as executives consider alternatives to London while British prime minister Theresa May weighs when to trigger two-year-long exit negotiations.

Some, particularly in fund management and insurance, say they are warming to Dublin.

Insurers Admiral and Beazley have said they are considering moving more business to Ireland while the funds arm of insurer Prudential is looking at expanding Dublin operations.

Mark Hemsley, the European head of pan-European stock exchange Bats, said that Ireland was “attractive because it’s the most similar to the UK structure”.

Two lawyers who advise financial services firms told Reuters that a group of fewer than a dozen executives would be enough to open an arm for an insurer or fund manager in Ireland. Moving part of a bank, however, would typically be a bigger task, requiring more capital and staff to be relocated.

‘Historic opportunity’

“Brexit represents a historic opportunity,” said Kieran Donoghue of IDA Ireland. “Over the next few weeks, our approach will be dialled up.”

Jim Stewart, an academic with Trinity College Dublin, said Ireland’s financial centre had hosted many of the vehicles involved in the financial crash and that it used “smoke and mirrors” to “camouflage” some activity.

“It is not just the tax concession,” he said. “It’s regulatory as well. The concession is that there is sometimes no regulation.”

Stewart points to the extensive use of special purpose vehicles, including section 110 companies, allowing deductions to cut tax on profits to as little as zero.

Reliance on tax breaks may have spawned a financial sector with little real activity with Stewart saying investment funds are largely administrated rather than run from Dublin’s International Financial Services Centre.

‘Low skilled’

“A lot of the jobs in the IFSC are fairly low skilled,” he said. “The thinking is always done in a major financial centre.”

Such criticism is rejected by Irish authorities, including the Central Bank, which said licensing procedures are rigorous.

“It’s the opposite to a brass plate financial centre,” said Padraic White, a former head of the IDA agency. “Ireland has a transparent tax system. There is no such thing as a tax deal. There is an aspect of sheer jealousy and envy.”

After years of cutbacks, Ireland also has other problems. As construction of new homes lagged, rents in Dublin have risen above the peak at the height of the property boom.

Many in London are still biding their time, listening carefully to the campaigns from Ireland, Paris and Frankfurt as well as keeping an eye on Brexit progress in Britain.

“Most thought this would never happen,” said Simon Tilford of the Centre for European Reform, a London-based think tank. “The test will come when they realise that there’s no going back. Then the real reaction will kick in.”

– Reuters