Savers may suffer as Nationwide UK set to leave Irish market

The Irish market for savings and deposits is to lose another key player with the news that Nationwide UK is to depart. The British building society, which first came to Ireland in 2009, says the decision came about as it is looking to focus on its core market in the UK.

In a statement, Nationwide UK said that following “a thorough review”, it has decided to close its Irish operation “as it focuses on its core purpose”.

“This was not an easy decision and our priority now is to the employees and customers of Nationwide UK Ireland (NUKI) who we will keep fully informed,” the building society said.

The move will impact some 14,000 customers, many of whom sought out the British building society for its better rates. Nationwide said it will shortly be writing to impacted customers to notify them of the decision and outline how this will affect their accounts.

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“Customers will not be penalised as a result of our proposal to close NUKI,” the building society said.

The move will also mean the loss of some 22 jobs, and Nationwide said it will work closely “with all affected employees to help them find alternative employment elsewhere”.

Attractive rates

The British building society first came to Ireland in 2009, and operated mainly online, but also had a branch on Merrion Row in Dublin 2, with an operations office in Spencer Dock. The savings specialist had frequently offered some of the best rates on the market, but its offerings have declined in recent years, along with the rest of the market.

It’s currently offering a 2 per cent return on regular savings, and 0.55 per cent on its 12-month fixed-rate savings account.

Last year, Nationwide announced that it would close its Isle of Man operation, Nationwide International.

While the bank has asserted that the move is about focusing on its core business, it could also have shades of Brexit. The building society is authorised in the UK, and operates in Ireland on a cross-Border basis under European Union passporting rules; once the UK departs the EU, these rules will no longer apply, which would mean that the building society would have to apply for a full licence in Ireland. Given the scale of the market, it may have deemed it not to be a worthwhile process.

Other UK savings providers also operating in Ireland under a similar approach include Leeds Building Society and Investec.

Savings market

The departure of the UK player is bad news for savers, given that the best savings rates on the market are typically available from foreign players, such as KBC, Nationwide UK and Rabodirect. Moreover, another foreign player, Dutch bank Rabodirect, has scaled down its Irish operations in recent months, closing its investment fund offering.

Nationwide now joins a list of savings providers to have departed the Irish market in recent years, including Northern Rock, Danske Bank and Halifax/Bank of Scotland.

Competition remains in short supply right across the Irish financial services market; back in 2006 for example, there were 14 current account providers, now there are just seven, although the recent arrival of online platform N26 does offer some welcome competition.

Irish-owned banks are offering particularly poor returns, and with pan-European platforms, such as Raisin.com, still closed to Irish investors, it remains difficult to get a decent return on your money.

This raises the risk of the real value of savers’ money being eroded. While official inflation rates are of the order of just 0.5 per cent for Ireland in February, some economists fear that muted oil prices are keeping a handle on inflation even as prices rise in other parts of the economy.