Cantillon: Grafton is latest Irish Stock Exchange departure

Grafton became the latest company to abandon Dublin in favour of London, when it debuted yesterday on the London Stock Exchange. The transformation will be complete when it enters the FTSE UK Index Series on December 20th and starts reporting and paying dividends in sterling next year.

Grafton is following DCC, Greencore and UDG Healthcare (formerly United Drug) out the door. The company will "remain headquartered, domiciled and tax resident in Ireland" but the departure of such flagship stocks raises serious questions about the long-term future of the Irish market

The ISE may have developed a very successful funds listing business over the past 20 years but for a variety of reasons its role as source of capital for Irish companies has diminished, with very few listings in recent years and a lot of departures for London.

The announcement in the budget by the Minister for Finance of a stamp duty exemption for trading on the junior Irish market – the ESM or Enterprise Security Market – is a small but welcome indication of official support for the Irish Stock Exchange.

The ISE has been knocking on the Minister’s door looking for some sort of relief for years and “engagement” was stepped up in recent months, according to sources. Presumably this plus the rash of high-profile departures during the past year has galvanised the Department into action.

The decision to focus the relief on the ESM is presumably in keeping with the wider agenda to develop non-bank sources of funding for business. It includes the various National Pension Reserve Fund-backed funds announced in last year’s budget, the impact of which has yet to be seen.

Transfers of shares listed on the ESM will be exempt from the 1 per cent stamp duty tax that usually applies. The loss to the exchequer in a full year is €5 million according to the budget documentation and the introduction of the measures requires a commencement order from the Minister. Given that no cost for the measures is pencilled into the 2013 accounts, it looks like that will not be forthcoming until the New Year.

Business will have to wait a little bit longer.