What Brexit Uncertainty Will Mean For Ireland’s FinServ Future

The Brexit saga is a case study in uncertainty ever since then-British Prime Minister David Cameron stepped down June 24, 2016, the day after the referendum vote unexpectedly ruled in favor of leaving the European Union.

The last few weeks, although eventful, have not been particularly clarifying. With  Brexit’s Oct. 31 deadline rapidly approaching, the same basic set of questions remains: Will there be a Brexit deal? If so, what will it look like? If not, what does a hard Brexit mean for the U.K.?  

The progress on the issue in the nearly two-and-a-half years since the Brexit referendum occurred has been less than inspiring. To outside observers — much of that first two years brought to mind a line from Samuel Beckett’s play, “Waiting for Godot:” “Nothing happens. Nobody comes, nobody goes. It’s awful.”

The last six months in general — and the previous six weeks specifically have modified the situation some. Lots have happened. Retail sales in the U.K. have tanked — as skittish consumers are holding on to their pounds. Bank lending to business has hit its lowest level in two years. Large companies saw a 4.2 percent decline in the growth rate of business lending, while small-and-medium size businesses saw their rates remain static at .8 percent growth.  

That has left watchers concerned that worry about a potential no-deal Brexit has suppressed appetite for capital — and alarming situation that sent regulators and senior bankers into meetings earlier this month to try to determine how to stimulate interest in a segment that is historically robust. 

Many have come — and gone. Most notably Cameron’s replacement, Theresa May, has stepped down — and Boris Johnson has stepped in. From there the events actually get too complicated and outside our wheelhouse to report — apart from noting that in the last three weeks, the Brexit situation has  involved the Queen, the courts, various members of Parliament switching sides or quitting government entirely and several dozen uses of the phrase “constitutional crisis” in headlines written worldwide.  

So a lot is going on, and many comings-and-goings — but at least it’s still awful right?  

Well if not awful, the situation is uncertain – particularly for financial services players working in London.  A world were regulations could be changing wholesale in the next few weeks has created an impossible situation for many players – that many are resolving by simply relocating, particularly to Dublin.

. According to EY’s Brexit Tracker, as of last spring, 23 firms have announced transfers of assets from the U.K. to E.U. member nations. All told, that brings the value of assets transferred out of the U.K. to £1 trillion ($1.25 trillion), up from £800 billion in early 2019. 

Among firms moving assets and transferring headquarters — Dublin remains the most popular location with 28 companies saying they are either considering or have confirmed relocating operations or staff.  Frankfurt, Luxembourg and Paris round out the rest of the top four. Moreover, noted John Liver, financial services partner at Ernst & Young, the progress is likely to soon begin ramping up — as the situation in the U.K. deteriorates, and the odds of a deal seem to go down.  

“It’s inevitable that there will be a significant ramp-up in September or October,” Liver said. “There is really no way around that. … Efforts are being re-energized as people see the increased likelihood of a no-deal. It’s always been something that people need to plan for, but the reality of it is starting to strike hard.”

Dublin remains a leading choice for firms looking for a relocation point out of London, Michael D’Arcy, who serves as minister of state at Ireland’s Department of Finance told  PYMNTS last year in an interview because it comes pre-loaded with so many structural advantages. Dublin is centrally located — 11 hours from both Hong Kong and L.A. — and will be the only EU country left where English is the native language other than Malta if the U.K. leaves at the end of October.  

“I would say that Ireland isn’t becoming a hub — Ireland is a hub,” D’Arcy said.

Moreover, a hub, he noted, that could well be standing on the verge of enhanced global status, particularly as the Brexit situation continues to look troublingly unresolvable, and fintech firms in London are increasingly looking for new, E.U.-based homes.

“There’s a misconception that some countries are trying to benefit from the divorce” put in motion by Brexit, he said. “I don’t use the term ‘benefit’ at all. What I do is I try to explain … that there are companies that may have serious difficulties that are U.K.-based that in a short period of time potentially will not have the opportunity to passport into EU 27.”