As the Irish government drew up contingency plans in advance of the UK’s referendum on whether to quit the EU, it saw one bright spot in the gloomy prospect of a prolonged economic downturn in one of Ireland’s major trading partners. That gleam came from the opportunity to lure financial services and other companies that need access to the European market from London to Dublin.
Assigned that task, IDA, the country’s investment promotion agency, has been at work for months. Its target is existing and potential investors in the UK for whom Europe is a key market. “For them, Ireland’s membership of the EU has become a lot more attractive,” says IDA CEO Martin Shanahan. “Our stability and continued access to the EU market will be positive.”
Within hours of the UK’s 'Leave' vote, IDA also dispatched letters to current and potential foreign investors reassuring them of Ireland’s commitment to the EU.
Ireland’s burgeoning financial services sector and sophisticated legal services may attract financial institutions wanting out of the UK. IDA routinely stays in touch with potential investors, but Mr Shanahan says the context of his discussions with UK-based institutions has changed. “They were keenly aware that the referendum was happening,” he says. Pharmaceutical and other hi-tech industries are also key targets.
Amid the general uncertainty about the UK’s future relationship with Europe, Mr Shanahan says it is too early to say how much investment will shift from the UK to Ireland or elsewhere as a result of the leave vote. “It depends on the level of access the UK has to the EU market,” he says.
Within the specific sectors that Ireland has targeted for FDI, the potential could be quite significant, says Edgar Morgenroth, a researcher with ESRI, an independent Irish policy institute that has analysed the economic implications of Brexit for Ireland. “Ireland has a comparative advantage in sectors where we already have scale,” he says.
However, while these sectors represent a large proportion of high-value jobs, they do not constitute a significant share of employment in the Irish economy overall, he adds.
IDA is well aware of the challenges it faces in helping to shore up the country’s fortunes. But Mr Shanahan cites its enviable record of success in attracting FDI: 2015 was a bumper year, and 2016 got off to an equally good start. “We are fully prepared for additional FDI in all our sectors,” he says.