At the time of writing, the United Kingdom has slipped past its self-imposed trade deal deadline of 15th October, but we are hopeful that there is still time for the UK and the European Union to hammer out a trade deal ahead of its exit from the European Union at the end of December.
We in Ireland are very eager for a trade agreement to be delivered – not least because six of the counties on our island sit within the UK, adding further social, political and economic significance to the EU split. A trade deal will provide, from 1st January 2021, more clarity on the movement of goods through, to and from the UK. We’re keen to have something in place that protects the interests of Irish companies that rely on the UK as a land bridge or as a market for their products.
The Impact on Foreign Direct Investment
As for international companies looking for a European base, they are clearly watching the negotiations to determine the best location for their global expansion – and there’s a lot to be said for the position that Ireland will hold for foreign direct investment (FDI) in the wake of Brexit.
Indeed, come 1st January 2021, Ireland will be the only remaining native-English-speaking and common law country in the EU. For one thing, these traits will position Ireland as one of the key jurisdictions for capital markets activity. They also hold particular FDI significance for companies coming over from North America. Certainly, at IQ-EQ we have already been seeing marked interest in Ireland from US and Canadian businesses operating in sectors such as technology, pharmaceuticals and life sciences.
The UK does, however, remain a large market whether in or outside of the EU. Thus, many businesses will still go ahead with plans to set up in the UK. However, they may also set up secondary operations in an EU country to allow them to avail of EU regulation, and given the uncertainty around how expensive doing business in the UK will be from 2021 onwards. Ireland is benefitting greatly from such contingency plans.
On the flip side of this, one of the points being hammered out by the negotiators on the Brexit trade deal is the level playing field as it relates to the attraction of foreign investment. Within the EU, there are state aid restrictions that must be complied with. If these limits do not have to be adhered to by the UK then, in theory, the UK could potentially offer attractive supports to companies for employment and research taking place in the jurisdiction.
Financial services is slightly different, given that there are regulated elements to businesses operating in this sector. The findings of EY’s latest Financial Services Brexit Tracker show that, of the 7500+ financial services jobs that have already left London to maintain access to EU markets, Dublin remains the most popular destination for staff relocations and new European hubs or offices.
Investment Limited Partnerships (Amendment) Bill 2020
Looking beyond the direct implications of Brexit, by the end of this year, Ireland is also set to have markedly strengthened its position as a funds domicile of choice, following the introduction of its long-awaited Investment Limited Partnerships (Amendment) Bill 2020 into parliament in September. The Bill will modify and significantly improve the existing ILP legislation, accommodating national and EU-level changes that have been introduced since the vehicle was first approved for use back in 1994.
The revisions proposed by the Bill, which is expected to be approved and enacted by the end of 2020, will ensure that the same standards of transparency apply across all investment fund vehicles in Ireland. It will serve to level the playing field with other EU jurisdictions, such as Luxembourg, and cement Ireland’s reputation globally as a centre of excellence for fund domiciliation, management and administration.
Taking Brexit and the ILP Bill together, we can expect to see greatly increased demand for Irish fund vehicles after 31st December, particularly from the private equity market. We’re already seeing fund managers looking at Ireland to set up their businesses to ensure they’re able to distribute on an EU-wide basis. After they start creating management company entities here, it makes sense that they will look to create funds here as well.
It is my genuine hope that a trade deal will be achieved between the UK and EU before the year is out, but whatever happens, I’m pleased to say that we will have a solution in both countries that can support our client base.