Big banks and insurance companies based in London are going to have to “call it” soon. Some have already moved on their post-Brexit plans, but some are still hedging their bets. Most had hoped to be in a position to make a final decision over the summer about whether they needed an operation within the EU – and if so how it would be structured. But as the talks have dragged on, the decisions have been postponed by many. However, with little clarity likely in the weeks ahead, decision time is looming and this will have an impact on the drive to attract financial services firms to the Republic, and Dublin in particular.
Many in the City of London assume they will be able to continue to sell from there into EU markets after Brexit, under so-called "equivalence" deals, under which the EU would accept the level of regulation in the UK was as rigorous as its own.
However, exactly how this would work, what level of access would result for London-based firms and in what sectors all remains to be worked out. And the Financial Times reported on Tuesday that the EU was warning the UK that access could not be taken for granted and that this all had to be negotiated. Any perception that firms in London were getting an advantage over EU-based competitors would be fiercely resisted, especially by France.
Ireland has already seen some inward investment, and the financial services jobs market is booming, with strong demand in funds, insurance and investment banking. Recruiter CPL has said financial jobs are up 45 per cent this year. And another recruiter, Morgan McKinley, has reported that some firms have established high-level operations here, involving "senior roles which have rarely been seen before in the Irish market".
This high-level recruitment is to establish a base within the EU – with sufficient senior presence to meet regulatory rules – which can be quickly expanded to a more significant operation if more operations are moved from London. Already big firms such as Barclays and Bank of America Merrill Lynch are expanding here, and Prudential has recently announced that its EU business will consolidate here. More of this will follow, if the big players get more nervous about how Brexit will pan out.
