New research predicts the imminent arrival of more UK financial institutions into the Irish market.

Datamonitor Financial Services in Ireland suggests the still relatively attractive interest rate margins enjoyed by Irish financial institutions makes the Republic a highly attractive market for UK players.

Royal Bank of Scotland's arrival in the Irish market, through its ownership of Ulster Bank, may accelerate further restructuring of the financial services sector.

Bank of Ireland's dalliance with Alliance & Leicester in 1999 will not be the last time that Irish banks examine potential UK or European partners, according to the company.

"New entrants will continue to be attracted to the Irish banking market as long as interest margins and levels of profitability remain well above the European average."

The life and pensions industry is less likely to attract new entrants though, but existing players will compete in an increasingly fierce manner for the business likely to come their way and there may be further consolidation.

Datamonitor suggests the battle for further consolidation in Europe may overshadow Ireland. "Ultimately, when predicting the future for financial services in Ireland, it is impossible to do so looking in isolation at the Irish market.

"With financial services becoming an increasingly international business, competitor activity at a European level is likely to have as much of an impact on financial services in Ireland as purely domestic competitor strategy."

The company believes e-commerce has the potential to revolutionise all retail financial services markets in Ireland. It states that if traditional financial competitors can fully embrace e-commerce, they can use their strong local brands and incumbent status to neutralise much of the threat presented by new entrants.

"All financial services companies must maintain a tight rein over their costs if they are to prosper in an environment in which consumers are increasingly aware of low-cost alternatives."