Ireland says the Brexit vote has led to a jump in enquiries from London firms considering opening offices in Dublin, one of a handful of European cities trying to draw business away from Britain’s financial center.
Irish officials say they have had more than 35 concrete enquiries from financial groups looking at setting up a base or expanding in Ireland, which is recovering after near bankruptcy in the financial crash.
“Post-Brexit, it’s meant a lot more meetings, more phone calls and a lot more travel,” said Eoghan Murphy, the minister tasked with promoting Ireland as a financial center. “I’m in daily contact with different players in the industry.”
Financial companies based in London are concerned that Britain’s vote to leave the European Union will stop them selling products in the bloc. EU member Ireland’s tax regime makes it an attractive alternative.
However, there will be questions as to whether it can maintain its appeal after EU regulators on Tuesday ruled that a special scheme used by U.S. technology giant Apple to route profits through Ireland was illegal and ordered the company pay billion of euros in taxes to the Irish government.
Ireland is trying to woo companies with the offer of a contracting entity, a legal toehold on the island that could be expanded when Britain leaves the EU, allowing them to keep the same access to the European market.
Businesses are being courted by other financial centers including Frankfurt and Paris as executives consider alternatives to London while British Prime Minister Theresa May weighs when to trigger two-year-long exit negotiations.
Some, particularly in fund management and insurance, say they are warming to Dublin.
Insurers Admiral and Beazley have said they are considering moving more business to Ireland while the funds arm of insurer Prudential is looking at expanding Dublin operations.
Mark Hemsley, the European head of pan-European stock exchange Bats, said that Ireland was “attractive because it’s the most similar to the UK structure.”
Two lawyers who advise financial services firms told Reuters that a group of less than a dozen executives would be enough to open an arm for an insurer or fund manager in Ireland.
Moving part of a bank, however, would typically be a bigger task, requiring more capital and staff to be relocated.
“Brexit represents a historic opportunity,” said Kieran Donoghue of Ireland’s Industrial Development Authority. “Over the next few weeks, our approach will be dialed up.”
Tax Regime Challenges
But Ireland, whose prime minister Enda Kenny once told a foreign business audience that they could “call me any time,” faces obstacles to growing its financial center, which employs more than 30,000 people.
Dublin’s open-door policy and flexibility could be upset by the European Commission’s demand that Apple hand over up to 13 billion euros to the Irish government for only paying between 0.005 and 1 percent on European profits.
Ireland said it intended to appeal the decision.
The iPhones maker cut tax by channeling profits through Irish subsidiaries. The penalty, overturning a tax arrangement agreed decades ago with Dublin, challenges the low-tax regime that has been the cornerstone of Ireland’s economy.
Low taxes also underpin its financial center, home to more than 6200 investment funds, and were that regime to falter, it could dampen the interest of companies looking to relocate.
Jim Stewart, an academic with Trinity College Dublin, said Ireland’s financial center had hosted many of the vehicles involved in the financial crash and that it used “smoke and mirrors” to “camouflage” some activity.
“It is not just the tax concession,” he said. “It’s regulatory as well. The concession is that there is sometimes no regulation.”
Stewart points to the extensive use of special purpose vehicles, including section 110 companies, allowing deductions to cut tax on profits to as little as zero.
Reliance on tax breaks may have spawned a financial sector with little real activity with Stewart saying investment funds are largely administrated rather than run from Dublin’s International Financial Services Centre (IFSC).
“A lot of the jobs in the IFSC are fairly low skilled,” he said. “The thinking is always done in a major financial center.”
Such criticism is rejected by Irish authorities, including the central bank, which said licensing procedures are rigorous.
“It’s the opposite to a brass plate financial center,” said Padraic White, a former head of the IDA agency. “Ireland has a transparent tax system. There is no such thing as a tax deal. There is an aspect of sheer jealousy and envy.”
After years of cutbacks, Ireland also has other problems. As construction of new homes lagged, rents in Dublin have risen above the peak at the height of the property boom.
Many in London are still biding their time, listening carefully to the campaigns from Ireland, Paris and Frankfurt as well as keeping an eye on Brexit progress in Britain.
“Most thought this would never happen,” said Simon Tilford of the Centre for European Reform, a London-based think tank.
“The test will come when they realize that there’s no going back. Then the real reaction will kick in.” ($1 = 0.8955 euros)