As the race to capture any financial services fall-out from London post-Brexit heats up, Dublin has emerged as the second most attractive financial centre in Europe, and may stand to gain the most from Brexit, a new PwC survey says.
PwC’s financial services attractiveness indicator has ranked Dublin as the second most attractive of the major European financial centres, with London in the top spot. Luxembourg, Paris and Vienna rank third, fourth and fifth respectively. Frankfurt is in seventh position.
Dublin ranked particularly strongly for the strength of legal rights, its ease of doing business, and talent. However, it was below the average score of the other eight financial centres for the availability of domestic credit for the private sector.
In addition, Dublin may be primed to secure additional business once the UK exits the EU. Passporting, which allows a financial institution based in one country to sell its products and services across the European Union, is a major factor in a centre's attractiveness, but London looks likely to lose this unless the UK establishes itself as a member of the European Economic Area. This may be unlikely however, given that membership of the EEA would require free movement of labour in the UK, as well as the UK making a contribution to the EU budget.
"The UK's potential loss of EU market access, including passporting benefits, poses great uncertainty in financial markets. While Ireland and Dublin offers certainty on access to the Single Market and EU passporting, other factors such as an English-speaking, flexible and highly skilled workforce, a pro-business environment and a strong and stable legal system are also positives. Brexit is causing many uncertainties. We are already seeing some UK financial services organisations making enquiries on relocating to Ireland and only time will tell how this will develop," said Damian Neylin, PwC Ireland head of financial services.
Indeed, US fund manager Fidelity is set to move a significant number of jobs from its current operation in Surrey in the UK to Dublin – although this is said to be unrelated to Brexit – while insurer Beazley is working to get European insurance licences for its Irish reinsurance business to allow it to operate throughout the European Union.
Ken Owens, PwC Ireland Brexit leader for financial services, says PwC is predominantly seeing enquiries in the areas of banking, management companies in the asset management industry and MIFID (Marketing in Financial Instruments Directive) firms.
Previous studies however, have rated other European financial services centres higher than Dublin. The New York Times for example, favours Amsterdam or Frankfurt as the cities with the most potential to capitalise on a weakening of London as a financial centre, while Deutsche Bank has warned that a dearth of office space, housing, school places and other infrastructure in Ireland, may limit the extent to which the country may be able to poach investment and jobs from the City of London.
And Brexit may not be all good for Ireland’s international financial services sector. Losing the UK from the decision table may unduly impact Ireland in terms of new financial services regulations emanating from Brussels, given that it is a fellow common law jurisdiction with a similar approach to financial services and is a fellow opponent of the EU’s efforts to introduce harmonised taxes across Europe.
“The loss of the UK as a ‘voice’ in financial services in Europe will be missed in terms of a measured approach to regulation,” says Owens.