Why Brexit could mean Dublin overtaking London

Dublin © Getty Images
Dublin could prove an attractive alternative to London

One of the factors that will determine whether Brexit is a success or not is the effect it has on Britain’s financial services industry, which provides a huge amount of tax revenue and around 10% of GDP.

Critics warn that restrictions on selling products and services to the rest of Europe will lead to companies relocating abroad, with knock-on effects on other industries. However, others argue that even if the City does face barriers, firms will ultimately choose to stay put. As well as the language barrier, continental cities such as Frankfurt and Paris are perceived as less business-friendly, with much higher rates of personal taxation (a key factor for high-earning bankers and lawyers).

However, the challenge from Dublin is much harder to dismiss. Even before Britain voted to leave, the Irish capital’s location, low rates of taxation and openness to foreign investment meant that it was rapidly turning into a major European financial centre.

One person who has been closely monitoring the situation from the Irish side is Mary Rose Burke, CEO of Dublin’s Chamber of Commerce. Before she became CEO, Burke worked for Ibec, Ireland’s main business federation, giving her an insight into what Irish business as a whole thinks about how things are developing.

Burke believes that “there has been growing activity since the June referendum”, with London firms talking to commercial property companies and office developers about relocating. Initially this just consisted of “companies making brief trips [to Dublin] to scope out opportunities”. However, in the past few weeks, “we’ve had second visits from people who initially expressed an interest” and these have involved “key decision makers”, again indicating that firms are truly serious about this. While companies are still “being discreet” about the fact that they are considering moving, “things are definitely going on, albeit quietly”.

The two types of business keen to move

While all parts of the financial sector are affected, Burke thinks that two types of firms are particularly eager to shift their operations. Insurance companies are very worried that the potential loss of “passporting” rights will make it much more difficult to do business with the continent.

Law firms are also concerned about their ability to bid for legal work in Europe after Britain formally leaves the EU. As a result, they are looking to get around this by shifting at least part of their operations to Ireland, which is only a short flight away (or in the case of Belfast, a 90-minute car journey).

Burke emphasises that, whatever happens, Ireland and the UK will maintain warm relations, with strong cultural and social links. However, this isn’t stopping both Dublin and Ireland as a whole from “making sure that the world knows that it is open for business”.

Indeed, Burke expects that any turn towards protectionism in Britain and the US will lead to global firms searching for a country that is more outward-looking. To help with any short-run disruption, Ireland has significantly boosted funding for its two main development agencies, Enterprise Ireland (which helps Irish exporters) and IDA Ireland (which gives foreign firms incentives to come to Ireland).

At the moment one of the big issues is how Brexit will affect the longstanding Common Travel Area between Ireland and the UK. This arrangement, which dates from 1923, essentially allows free movement for Irish and UK nationals between the two countries without any border controls. There have been worries that it could fall foul of both EU law and Britain’s desire to restrict immigration. However, Burke is confident that the agreement will continue in some form, as both the UK government and the other EU countries “accept that Ireland has a unique position”, which needs to be respected.

One idea that is very definitely not on the cards is any prospect of “Irexit” – Ireland deciding to follow the UK out of the EU. While a few fringe figures, including a retired diplomat, have endorsed the idea, Burke sees such talk as “kite flying” and “opportunistic”, from people with their own agendas. She certainly “hasn’t seen anything that would support such sentiments”. Indeed, she firmly believes that the Irish population is “much more supportive of the EU than the UK”, with general agreement that the Republic has “benefited greatly from EU membership”.

  • 9u9

    Seriously deluded. British financial institutions will need nothing more than a brass plaque and a local stooge in Dublin (or anywhere else in the EU). For these scraps Dublin will be fighting it out with Paris, Frankfurt and God knows where else. I can only suppose that such scraps may seem a big deal to Dublin.

    Irexit is not such a daft idea but probably national pride in Ireland will not countenance such a bold move. It must be galling that the independence movement initiated at the Post Office in Dublin should end in the abject spectacle of ever closer union with Brussels.

    • Firebird3

      Aren’t Ireland taking out the pot much more then they are putting in?. Hence, why would they leave.

      • DubbelOSeven

        @9u9 Whilst I agree that the potential damage to the City is sometimes overplayed, your analysis is a gross oversimplification. The establishment of a local presence is only one of four methods of trading services across borders – a nameplate will not be sufficient to preserve large parts of the UK’s existing trade in services with the EU. Something more will be needed – at the very least the UK will have to regularise its position as a WTO member to benefit from GATS trading terms, but a free trade agreement with the EU will be needed to incorporate extensive GATS+ rights given the importance of the trade in services to the UK. Moreover, activities such as euro clearing will almost certainly leave London – the UK won a landmark case against the ECB in 2015 to keep euro clearing in London (on the basis of its EU membership), but that judgment will become irrelevant once Brexit happens.

        @Firebird3 Ireland has been a small net contributor to the EU budget since 2014. However, the benefits of EU membership greatly outweigh the costs to Ireland – for a small open-market economy of 4.5 million people, unimpeded access to a geographically proximate internal market of 500 million first-world consumers, is priceless.

        • Loneswordsman

          Nice reply!

    • FRED

      In Paris, no way … with Emmanuel Macron ? LOL

  • Firebird3

    All by the by really, when the EU implodes, it will be ‘normal service’ in London again if anything does happen in-between times.

    • Tim Sutton

      The EU isn’t going anywhere. It’s a bigger, richer and more stable market than the US and only an idiot would walk away from being a part of that. No other country will.

      Brexidiots are going to have to realise at some point that a small island of 60 million people is essentially worthless without full access to the EU.

      Being fully in the EU while keeping the pound was the single greatest competitive economic advantage in history. We’ve thrown that away in exchange for a lie written on the side of a bus.

      All the financial sector will move to the EU. Even if for some reason they stayed in the city with a nominal office in Dublin or Frankfurt, ALL their business and revenue would be booked and taxed through that EU address. None of it would come to us.

      London was the world capital of finance. Trillions of revenue. Thousands of high paying and high taxed jobs. All thrown away to show intelligent people who know things who was boss.

      • Peter Edwards

        I would not say worthless, but we will have an uphill battle to keep our financial services. I don’t get why people think language is a barrier English is the business language of Europe. So anyone living in London can easy relocate to a European financial centre just like European citizens have been able to come the U.K and easily integrate.

      • MrVeryAngry

        Generally. No.

        • Tim Sutton

          I’d be delighted to be wrong, as we are talking about the slow economic death of the UK as a world power, but it’s basic economics.

          If you voted to Leave you voted to make the UK poor and irrelevant as anything other than a closed market of 60 million people on a small island.

          • MrVeryAngry

            Nope. That’s your opinion – to which you are fully entitled. I happen not to agree with it. And as we are not going to agree I am not going to debate it.

            • Tim Sutton

              Can’t you see that the blind rejection of evidence just because you don’t want it to be true is incredibly harmful?

              Its like refusing to open a final demand envelope and thinking that means everything is now fine.

              You don’t have to listen to me or anyone else. Just look at what has happened in every single case of an open market becoming closed.

              • MrVeryAngry

                Look, “Can’t you see that the blind rejection of evidence just because you don’t want it to be true is incredibly harmful?

                Its like refusing to open a final demand envelope and thinking that means everything is now fine.

                You don’t have to listen to me or anyone else. Just look at what has happened in every single case of an open market becoming closed.

          • Firebird3

            No, it would stand to reason that out of the EU we would be better off.
            With only a few Countries that are net contributors, including the UK, we are subsidising the poorer Countries and that will not change. With over 20 Countries already clambering to trade with us, with a total GDP of £40trillion, why limit ourselves with only £12trillion of the EU, plus we can keep all our profits.
            Apart from that, we import more than we export to the EU, so it wouldn’t be in their interest to ‘cut us off’.

      • London Guy

        London has been the global capital of finance for about 200 years before the EU existed.

        • Tim Sutton

          OK,

          1: you do know we don’t own half the world any more? Countries have their own banks now and we don’t get to take all their stuff anymore.

          2: That’s just not true in any case. London has been the worlds financial center for about 20 years, because of being in the EU while keeping the pound, having all the benefits of the single market while being able to set our own currency regulations.

          Before that it was New York. Before 2000, around 75% of global public offerings were on New York exchanges. 10 years later, that had fallen to 15%.

          I suggest you do some reading, because Brexit is going to be a disaster of quite enormous proportions for our country, and you don’t seem to know what it is you voted for.

          • London Guy

            London, on and off, has been no.1 or 2 for well over a century and actually grabbed most of NY’s issuance business due to adopting laxer regulations after 2000.

            One obvious question is if our passporting rights are not extended beyond Brexit, how will EU based firms operate easily from London? The world is still serviced from London because the expertise is here.

            If a million or so people up sticks to move to Frankfurt or Dublin, that might not be the case. But I don’t see that happening.

            Brexit will turn out to be an administrative hurdle… at the very most. The EU bureaucrats will see sense.

          • Firebird3

            You have absolutely no idea that it’s going to be a disaster, you just riding on the bandwagon of anti Brexit. Apart from that, it was going to end in disaster if we stayed ‘in’

      • FRED

        As a Frenxidiot, I hope we will leave soon this Soviet Union. 10 % unemployment, massive immigration, total energy deregulation, etc

      • Hugh Jarsse

        Whilst financial institutions may set up operations in Euroland as a defensive measure, there is no chance of the financial sector moving lock-stock to any time soon. Anybody working in the financial world understands that the euro is on borrowed time. It has so many internal contradictions and lacks basic structures that failure is inevitable. In its current form is unlikely to last five years, absolute outside 10yrs depending on the level of (ultimately pointless) intervention. It should have all ended in 2012 before Draghi’s ‘I’ll do anything it takes’ speech. Unfortunately such interventions are prolonging the agony; death by a thousand cuts rather than a beheading. No financial institution with any sense is going to migrate into the centre of such a gathering maelstrom. Fundamental pillars which are necessary for the success of the single currency are absent; political and fiscal union are absolute requirements – alas they will never be agreed to by various populations under democracy. There will be crisis after crisis until eventual fracture – and I’m sure financial institutions do not want to be fully hooked up to that bomb when it blows.

      • EUROHICCUP

        No thanks!!!…I will not be filling the pockets of the arrogant German…I shall teach the younger ones self-sufficiency and loving their country in good times and in bad times…Britain has all the means, sources and the people for a bright future, united, outside the EU’s kleptocrat despotry….

  • EUROHICCUP

    Shop British, Buy British…Cut down on your imports from Germany…Give jobs to your own people, not to Germans…Don’t give your money to the “EU” manipulators…

    • James Taylor

      I absolutely agree. It annoys me to see so much Public Sector spending on foreign imported vehicles for Police, Ambulances, local council vehicles etc. and then we wonder why our manufacturing sector isn’t doing better!