Ireland wants to pounce on £1.5 trillion of assets
Ireland’s financial industry could benefit from Brexit with an estimated £1.5 trillion worth of banking assets set to depart UK shores once the country leaves the EU, according to a new report.
Bruegel, a Brussels-based think tank, anticipates that up to a fifth of wholesale financial activity within the EU could shift to Ireland following Brexit.
It currently holds a two per cent share but, with London dominating the sector with 90 per cent, this could shoot up to 18 per cent once things are moved around. Whatever the situation, the report states clearly that the UK’s wholesale banking will suffer due to its decision to leave the EU.
“About €1.8 trillion, or 17 per cent, of all UK banking assets might be on the move as a direct consequence of Brexit,” it says.
Whether capital markets services move towards an integrated wholesale market or one that fragments along national lines, “the UK’s share of the total European wholesale market drops from 90 per cent to 60 per cent because of Brexit”.
The paper predicts that Frankfurt would be the largest beneficiary if it were to go down the fragmented route. Since it is home to the European Central Bank and the second-biggest player after London, it could end up with 45 per cent of the EU wholesale market post-Brexit.
Paris would cover 20 per cent, while Dublin would be looking at 15 per cent and Amsterdam ten per cent. Spread out, however, as would be the case following integration, Dublin would take an estimated 18 per cent share while Frankfurt’s coverage would shrink to 35 per cent.
The authors explained that it will take time to weigh up which system will provide the greatest return for each country in terms of costs and benefits.
“The fact that several countries are vying to attract business from London suggests that they hope to reap the benefits from having larger financial sectors, not least in the form of additional tax revenue,” they said. “At the same time, countries with larger financial sectors face higher potential costs associated with potential public expenditure in case of financial turmoil.
“These potential costs would be shared by all Euro-Area countries in a full banking union, but not in an incomplete banking union, as is currently the case.
“It will be a challenge to keep a sense of the balance between the benefits and potential costs across euro-area countries.”
The report also claimed that about 10,000 banking jobs and 20,000 related professional service roles will become available elsewhere. As well as citing Frankfurt, Paris, Dublin and Amsterdam as potential beneficiaries, it suggested Brussels, Luxembourg, Warsaw, Milan and Vienna among others could be set to gain.