Irish Economy
Ireland: Financial services 'strategy' a menu of 30 steps; 24,000 or 35,000 jobs?
By Michael Hennigan, Finfacts founder and editor
Mar 12, 2015 - 7:41 AM

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Enda Kenny, taoiseach, Dublin, March 11, 2015

Ireland: The Government launched a report Wednesday which is claimed to detail a new strategy for the international financial services sector for the period to 2020 but the document should more accurately be termed a menu of 30 steps while employment in this exporting sector may be about 24,000 or over 35,000.

The report, "IFS2020: A Strategy for Ireland’s International Financial Services sector 2015-2020," had its genesis last September when Simon Harris, minister of state at the Department of Finance, recommended a review to the Government following the publication of the biannual Global Financial Services Index, which showed that in a poll of finance professionals coupled with benchmarking factors, Dublin's International Financial Services Centre (IFSC) plunged to a rank of 70 of 83 global financial centres.

Global Financial Centres: Dublin tumbles to 70 rank from 13 in 2008

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Wednesday's report does not detail a strategy and is consistent with the typical  Irish government report of the post-Whitaker era — accentuate the positive while ignoring inconvenient truths.

In effect it is like a business plan with no recognition of threats from competitors and while the banking collapse would have been expected to dent Ireland's international reputation, the global financial services index is ignored.

It is noted that 35,000 are employed in the sector with over a third located outside Dublin.

However this is a total compiled by an industry lobby group while the Government itself put employment in international financial services at 24,000 at end 2013 with 6,500 in indigenous firms — the data are compiled from exporting firms supported by State enterprise agencies. In 2014 Financial Services Ireland added sectors including accounting firms to get its total of over 35,000.

The majority of jobs are in administration and the new report has  a target of adding 10,000 net jobs.

Less than a 1,000 people are employed in aviation leasing even though 50% of the world’s leased commercial aircraft are owned or managed from Ireland.

€3.2tn in assets under administration can seem impressive but much of that is in shell companies.

The report says: "We have identified 30 Actions to be implemented immediately, and we will continue to add to these on an annual basis to ensure we are responsive to new trends and emerging opportunities. We expect that this sustained focus will result in the creation of at least 10,000 net new jobs in the international financial services sector by the year 2020."

The big centres are eager to become renminbi hubs and the report notes the importance of Islamic Finance but it's not clear how more business can be generated.

The report notes that "Ireland has an international reputation as a centre for Fund Administration, serving EU markets and other international financial centres. In recent years, there has been a seismic shift in the regulatory environment of the Funds industry, particularly in the EU. New legislations such as the Alternative Investment Fund Managers Directive (AIFMD) and Undertakings for Collective Investment in Transferable Securities (UCITS) as well as new regulators such as the European Securities and Markets Authority (ESMA) have been introduced in recent years."

NAMA is involved in projects that will had office space in Dublin's docklands — this is important as rents of prime office space is threatening competitiveness.

Prime office rents in Dublin to rise by up to 31% in 2015 after 29% surge in 2014

Action 1 IDA Ireland says: "IDA will actively promote and market Ireland as a high quality location of choice for investment in IFS. This will be achieved working in partnership with key stakeholders at home and overseas, including the Embassy network, with the intention of meeting investment and job creation targets to contribute to sectoral development and economic activity."

Action 2 Enterprise Ireland says: "Leverage and work in partnership with the Embassy networks as appropriate to support overseas activities, promotional engagements and trade missions."

Action 8 Banner Brand for the IFS sector says: "Work with key stakeholders, including industry associations, to develop a 'banner brand' and associated marketing material which will be used to promote Ireland’s IFS sector, including during overseas trade missions and at selected international events.

Action 9 is on organising an IFS conference in 2016; Action 22 Drive Research, Development and Innovation (RD&I) within existing firms while the Clearing House lobby arrangement is to be replaced with separate public and private committees that will meet each other four times a year.

FinTech is seen as a big potential and an Accenture report is cited. It is however unclear if the statement: "Dublin-based fintech firms active in London are also well funded, thanks to growing tech investment in Ireland. SumUp, a point-of sale payments provider, CurrencyFair, the online currency exchange, and Fenergo, a compliance solution have altogether raised upward of $25m," relates to companies that are Irish because they have headquarters in Ireland for tax purposes or were Irish startups.

To date, a number of signature investments have been secured for Ireland, including Global Innovation Labs from Citi and MasterCard; next generation analytics centres from Aon and Munich Re; cybersecurity centres from Zurich and Liberty Insurance and software development centres from Fidelity and Pramerica. But Ireland is also establishing a strong global reputation for innovative FinTech startups. The startup rate for Irish-owned FinTech companies is accelerating rapidly. In 2014, Enterprise Ireland supported twice as many early stage FinTech startups than in the previous year. This thriving tech startup scene, combined with established research centres, creates what is an internationally recognised ecosystem for Fintech research, development and innovation. As a result, Ireland is uniquely positioned to become a leading global centre for Fintech investment – where global multinationals can develop and implement their innovation strategies, while Irish-owned startups continue to scale up and succeed in global markets. Already, Ireland, along with the UK, captures most of the FinTech venture investment occurring in Europe. According to a 2014 report by Accenture, Ireland and the UK have seen the volume of FinTech deals triple since 2011, with a five-year compound growth rate for FinTech financing twice the global average and twice that of Silicon Valley. In 2013, the UK and Ireland together accounted for more than half of Europe’s FinTech deals (53%) and more than two-thirds of its total financing."

Despite the foregoing, there is no hard data on the number of FinTech startups in Ireland and the report notes: "In 2014, three FinTech Accelerators were launched in the Irish market: the National Digital Research Centre (NDRC), Mastercard and Accenture Innovation Labs. The launch of these FinTech accelerators should drive up the number of FinTech startup companies over the coming years."

Are accelerators actually a worthwhile investment for a startup?

Tech accelerators and their value in Ireland and elsewhere

While some of the 30 steps will likely help if issues are being currently ignored, this report does not detail a strategy but is a summary of ideas of many interests and people — like the proverbial committee that sets out to make a horse but ends up with a camel.

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