Posturing and lobbying obscure financial future
Cantillon: Here’s why new jobs mentioned in the IFS 2020 report may never materialise
Eoghan Murphy: The Minister said there is “huge interest” from companies considering re-locating from London to Dublin. Photograph: Cyril Byrne
With the publication of the latest strategy for Ireland’s international financial services sector, the expectation that Ireland can secure some concrete financial projects in the wake of the UK’s exit from the European Union is mounting.
In recent days it has been reported that US bank Citi will move up to 100 jobs out of London, with Dublin a potential candidate, while a host of other potential movers have also been put in the frame.
Launching the report on Monday, Eoghan Murphy, the Minister of State at the Department of Finance, added to this narrative, remarking that there is “huge interest” from companies considering re-locating from London to Dublin.
While the latest IFS 2020 report points to the potential to create 10,000 jobs here over the next three to four years, there are possibly as many reasons why it won’t.
It’s difficult to ascertain exactly what is going on amidst the posturing and lobbying of financial services companies. Mr Murphy told RTÉ radio that banks are unlikely to make “wholesale moves” to Dublin.
And Dublin hasn’t exactly been a hotbed of new arrivals in recent years; figures from the Central Bank, for example, show that there were just two new financial services companies authorised in 2016 – a Munich Re-backed insurer, Queen Street, and Sofinsod, a subsidiary of Sodexo.
What’s more, the competition is intense. For high value front office trading activities, larger financial centres such as Paris and Frankfurt have frequently been cited, while low-cost cities such as Warsaw – which is used by many Irish-based funds companies as a low-cost outsourcing hub – are also in the frame.
Then there are the more personal issues for the employees. Despite progress made in the last two budgets to bring personal tax rates in Ireland back in line with international norms, Ireland continues to have high personal tax rates. Tax experts say Ireland falls down in two key areas: the level at which you start paying the top rate of tax (€32,800) and the scale of the top tax rate (52 per cent).
Similarly the availability of quality schools has long been a critical decision factor for executives when making re-location decisions. The issue is addressed in the latest action plan. However, there are no concrete steps outlined in the report to close any gaps that may exist.
Finally, if Ireland loses the battle for any business that does re-locate, the damage could be far greater than just the missed opportunity. The greater risk, perhaps, is the loss of the strong links financial services companies have built up with their counterparts in London.
Now, when a UK-based asset manager is looking to set up a cross-border fund, it is Dublin, rather than Luxembourg, that is the most obvious choice. But if this business relocates to the continent, a Paris- or Frankfurt-based operation, staffed by locals, may have closer links with a centre like Luxembourg rather than Dublin.