The time between the Brexit referendum taking place in June 2016 and the UK finally withdrawing from the EU in January 2020 gave foreign companies active in the country the opportunity to assess their options. Many argued that the UK’s departure from the European trading bloc would negatively impact the economy, and nearby countries such as Germany, France, Ireland and the Netherlands began to court these foreign companies, hoping to pick up their business in the event of a mass exodus.
Investment promotion agencies (IPAs) across Europe, hopeful of picking up some high-profile relocations, were put on red alert, and Ireland’s IPA, IDA Ireland, was no exception.
Ireland acts early to gain Brexit boost
IDA Ireland swiftly released literature with titles such as ‘Brexit advice for FDI companies’ in the aftermath of the Brexit referendum in the UK, detailing action plans regarding custom clearance, logistics and financial support available to Irish companies.
Following the vote, the CEO of IDA Ireland, Martin Shanahan, made his intentions clear in a press release, stating: “While not what we had hoped for, the situation may present opportunity for Ireland in attracting foreign direct investment [FDI]. Ireland will remain a member of the EU with full market access and that will be attractive to investors.
“Ireland’s proposition to inward investors will continue to resonate. Our deep and varied talent pool, competitive and consistent tax regime, and long track record of working with foreign companies is something that companies are interested in. The fact that Ireland is English-speaking, and a member of the EU and eurozone, is also attractive.”
Dublin’s rise as a financial services hub
By March 2019, Ireland’s self-promotional efforts were starting to pay off. IDA Ireland reported that 70 individual investments related to Brexit, with more than 5,000 associated jobs, had been approved since June 2016. As befitting a capital city, Dublin took on the bulk of this investment.
According to a report by New Financial, the city was the leading beneficiary for Brexit relocations as of early 2021. Among the host of international companies uprooting their UK operations, there was an influx of financial services investments. Dublin welcomed 135 new financial companies between mid-2016 and early 2021, equating to one-quarter of all Brexit-related moves. This was followed by Paris with 102 relocations, Luxembourg with 95, Frankfurt with 63 and Amsterdam with 48.
Both start-ups and financial heavyweights, among them Bank of America, Citi and JPMorgan, have been attracted to Ireland in the past six years. JP Morgan announced it had purchased a new 12,075m2 office in Dublin's Dockland’s area, with the capacity for 1,000 employees. Carin Bryans, senior country office for Ireland at JP Morgan, commented on Dublin’s appeal: “Given the momentum of our local businesses, this new building gives us room to grow and some flexibility within the EU. Dublin has the vibrant business and technology communities that suit a global firm like ours.”
Likewise, Bank of America’s vice-chairman, Anne Finucane, was full of praise for Dublin when explaining that the company had spent approximately $400m preparing its business for Brexit, which included setting up its EU hub in the Irish capital. US-based Citi, which announced plans to expand its existing Dublin operations back in 2017 following the Brexit referendum, has seen profits in the city soar. In April 2022, the company announced that it "plans significant asset growth at its Dublin-based EU hub" following a 22% expansion of its balance sheet in 2021 to more than $90bn.
Success breeds success
Over the years, Ireland, and Dublin in particular, has made a conscious effort to position itself as a global hub for the financial services industry. Pre-Brexit, Dublin had already laid the groundwork to lure international financial and tech companies to its 'Silicon Docks' business district. The fact that the city had already attracted and sustained repeated investment from major international companies made the location all the more appealing to financial services businesses when considering their post-Brexit options.
A star-studded list of names present in Dublin before the Brexit referendum included the likes of AirBnB, eBay, Facebook, Indeed, LinkedIn, Microsoft, PayPal and Twitter. Google, meanwhile, operated its EU headquarters from four buildings covering 47,000m2 in the aforementioned Silicon Docks. These anchor companies helped secure additional investment from UK-based companies keen to relocate to another well-established business cluster.
Shanahan at IDA Ireland has noted that although the country has been successful in winning post-Brexit investment, it is imperative that Ireland remains committed to maintaining a positive business environment. “It has been encouraging to see so many high-profile banks and insurance firms publicly endorse Ireland as their destination of choice," he said. "Post-Brexit, nurturing talent, delivering a pro-business ethos and maintaining a consistent track record must all be the priorities of the day if we are to continue to grow the economy at the current rate and remain competitive.”
A surge in trade with Northern Ireland
The post-Brexit environment has enabled all-Ireland trade to flourish. According to a report from Ireland’s Central Statistics Office, imports from Northern Ireland to Ireland increased by 65% in 2021 when compared with the previous year, while exports from Ireland to Northern Ireland rose by 54%.
Ireland is in a unique position in that it forms the only land border between the UK and the EU. Since the start of 2021, under the Northern Ireland Protocol, the trade in goods with the UK has been subject to customs checks. Since the much-disputed protocol came into force it has become more difficult for businesses in Ireland and Northern Ireland to import goods from the mainland UK. Northern Ireland remains within the customs territory of the UK while also being in the EU's Single Market for goods, which means that products arriving from Great Britain are subject to new customs checks.
In contrast for goods traded across the Irish border there are no new checks to adhere to and the situation remains as it was pre-Brexit. This means that many businesses are now sourcing products within the island of Ireland rather than from the UK mainland, causing a surge in trade between the two. In fact, imports to Ireland from the rest of the UK declined 13% from 2020.
John McGrane, director-general of the British Irish Chamber of Commerce, has stated that the decrease in imports to Ireland from the UK mainland can also be attributed to Irish companies sourcing new suppliers in Europe. “The reality is that trade doesn’t do politics," he said. "It just finds the shortest route to market.”
Exactly how much as Ireland benefitted from Brexit?
In December 2021, it was announced that Ireland would receive $966m (€911.54) from a European Commission fund designed to ‘mitigate the impact of Brexit’. The Irish government was the first state to benefit and the largest beneficiary, receiving $379.8m in 2021, and being promised $290.7m in 2022 and $296.5m in 2023. Following Ireland, the next largest beneficiaries of the fund are the Netherlands, France, Germany and Belgium.
Explaining the allocation of this funding, Elisa Ferreira, the EU commissioner for cohesion and reforms, said: “The EU’s Brexit Adjustment Reserve stands for solidarity with those most affected. Brexit has had a negative impact on many people’s lives. Within the EU, it is the people in Ireland who feel it the most.
“The funding that Ireland will receive will contribute to improving living standards, supporting economic growth and mitigating the negative impacts in local communities.”
The money will also be used to "support employment, businesses and local communities negatively affected by Brexit, including those in the fishing industry" as well as support custom checks at ports and airports.
How is Ireland winning the Brexit race?
In the aftermath of the Brexit referendum, investors wanting to quit the UK to retain access to the EU market were spoilt for choice. Many countries offered a stable economy, geographical proximity to customers and solid infrastructure, so why did Ireland become the destination of choice for these businesses?
Ireland has offered companies the opportunity to relocate their business with as little disruption as possible. Thanks to the Common Travel Area arrangement between the UK and Ireland, British citizens are entitled to live and work freely in Ireland with no restrictions. Furthermore, the cultural similarities between the two countries enable a smooth transition. Although English is widely spoken across Europe, it being the main language spoken in Ireland limits complications that may arise in a mainland European destination.
In comparison with other European countries such as Portugal, Germany and France, Ireland also offers a much lower corporate tax rate of 12.5%. Moreover, expenditure on research and development in Ireland qualifies for a tax credit of 25% in addition to the standard deduction, an initiative that holds a great deal of appeal to tech companies.
Ireland has managed to use the turmoil created by Brexit to the best of its advantage. Its welcoming business environment, its close proximity to the UK, its cultural similarities, all of these issues have allowed it to cash in on the UK leaving the EU in a way no other European country could. These strengths meant that Ireland was already poised to lure additional investment from the UK. Brexit simply accelerated that process.