Dublin has potential to be Europe’s most attractive finance hub post Brexit

3 Aug 2016

Dublin could emerge as the most attractive European financial services centre post Brexit, but overall Ireland faces unprecedented trade risks as the UK exits the EU

Dublin has the potential to be the most attractive location out of the major European financial services centres post Brexit, new research from PwC has claimed.

The recent PwC Global Economy Watch included a financial services attractiveness indicator that currently ranks Dublin as the second most attractive of the major European financial centres.

London currently holds the top spot, while Luxembourg, Paris and Vienna rank third, fourth and fifth respectively.

‘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’

An important factor that contributes to Dublin’s and London’s current success as international financial centres is access to the single market via passporting arrangements giving financial institutions based in these locations unfettered access to the rest of the single market.

However, the indicator does not include factors such as the appeal of different cities and regions as a place to live, which is also a factor determining the attractiveness of a financial centre.

Research in the aftermath of the Brexit referendum in the UK indicated that the Irish tech economy could be boosted by Brexit, potentially making the country a talent goldmine for tech giants and start-ups alike.

Passporting control


The only way for London to continue to benefit from passporting would be for the UK to join the European Economic Area (EEA) when it leaves the EU.

But given that this scenario would probably mean free movement of labour continuing to apply, the UK making a contribution to the EU budget and EU-wide regulations still having to be applied in the UK, this could be a difficult outcome to achieve politically.

PwC has warned that the loss of passporting in the UK post Brexit could see London lose its place as the EU’s strongest financial centre, with Dublin rising to the top spot in the league.

Factors such as a change in government policy, the extent of spare capacity that could support an inflow of financial services activity or the presence of bodies like the European Securities and Markets Authority (ESMA) in Paris or the European Central Bank (ECB) in Frankfurt, could also see one of the other financial centres PwC has identified emerge as a new star performer.

“The UK’s potential loss of EU market access, including passporting benefits, poses great uncertainty in financial markets,” said Damian Neylin, PwC Ireland head of financial services.

“While Ireland and Dublin offer 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.”

Ireland dangerously exposed to trade risks post-Brexit

The post-Brexit Europe won’t be all sunshine and roses for Ireland and the country faces severe disruption to traditional trade channels.

PwC said the UK’s future trading relationship with Ireland and the EU is one of the biggest uncertainties following the referendum.

This is mainly because it lacks a precedent.

It is unclear whether the UK will be able to continue to access the single market, or if it will have to negotiate a free trade agreement, or even have to trade with Ireland and EU member states under World Trade Organisation (WTO) terms.

PwC’s analysis further identified the 10 EU countries that export the most to the UK, relative to the size of their economies, and this showed that Ireland is the most-exposed EU country to Brexit from a trade perspective. Ireland (19.9pc) and Cyprus (9.5pc) sit at the top of the list.

Of the larger European economies, Germany exports the most to the UK relative to the size of its economy (3.7pc). France (2.5pc) and Italy (1.7pc) don’t rank within the top 10.

“Businesses in all industry sectors need to put the case to Government as to the impact of Brexit on their businesses,” David McGee, PwC Ireland Brexit leader said.

“While initial contact by our Irish Government has already been made with some of our EU counterparts, this process must continue to ensure the best possible outcome for Ireland can be achieved. But there is a long road ahead.”

Dublin Spire image by Jordache via Shutterstock

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years