It is important for Irish business to look quickly for opportunities arising from Brexit and take advantage of them. With regard to the financial services industry in particular, such opportunities may be offset by the negative implications for Ireland, but they do exist.

Many financial services companies had already reviewed strategy in the run-up to the referendum. What emerged was that, no matter how the vote had gone, some of them would have had to make changes in their operating model.

The City of London is, and has been for many years, the number one financial services location globally. It is unlikely to lose that status overnight despite the outcome. In the EU its nearest rivals are Dublin, Luxembourg, Frankfurt and Paris.

During the strategy reviews before the Brexit vote, some companies realised one of their weaknesses was in their location of activities; in particular they relied too heavily on the UK as the location of choice. Some therefore decided to look further afield to diversify their location risk, no matter what the referendum outcome. More will be doing so now.

In the last few months, Credit Suisse and Citibank have already moved people and activity to Ireland to grow their presence here, while keeping a significant footprint in London. It is a case of creating options on locations, rather than “keeping all your eggs in one basket”.

Stress testing the global operating model and ensuring there is diversification is key. With hindsight, this has proven to be very wise.

Access to the single market A critical issue for financial services companies is the ability to “passport” their operations

seamlessly from one EU location to another under EU regimes such as MiFiD, AIFMD, UCITS.

For example, being regulated as a bank in the UK allows that bank to passport its banking activities into other EU countries without further regulatory authorisation procedures.

Financial services companies which have located their head office or product platform in London for their insurance, banking or funds business will now be concerned that they could lose this facility, unlike those who have a better diversification of their passporting activities across two or more EU locations.

For that reason, many companies have already looked into broadening their product suite to include not just UK funds, but also Irish and Luxembourg funds (sometimes with similar investment strategies) to ensure diversification and avoid any disruption to their day-to-day business.

Some have explicitly stated that Brexit would lead them to consider moving location for at least some of their business.

Overexposure to the UK as a trading partner

Sterling has seen an immediate and dramatic weakening post-Brexit and it is difficult to predict what the coming weeks hold. Something as simple as buying sterling to pay for UK purchases has now become a game of roulette for banks and businesses alike. The financial services industry will be particularly affected by this volatility, because of investments held in sterling and UK stocks and investments.

Practical considerations

What is clear is that financial services companies will need to look at all areas of their operations, both on a global scale and and on a day-to-day basis.

This review will need to cover issues such as IT infrastructure, regulatory and tax impacts, data protection and AML, talent and free movement of people, as well as clearing/payment and settlement processes.

Ireland has a track record of providing a transparent tax system with a 12.5 per cent rate for operations with substance here. In the financial services area it has been the “nearshore” hub for UK middle and back office functions for over 20 years, and is proven to have the right infrastructure to support UK financial services businesses considering expanding or establishing an EU footprint.

It has also been the location of choice for many UK and international financial services companies which passport their financial services from Ireland throughout the EU.

There are over 400 international financial services businesses based in Ireland, employing over 35,000 people. With the UK vote to leave, Ireland is now the only remaining English speaking member of the EU with a similar legal and regulatory approach to that of the UK.

The next few weeks will be a time to reflect, as well as to plan and take action for the months and year ahead. Much of this will hinge on how the UK negotiates its exit, which will not be known for some months. In the meantime, financial services companies are likely to make strategic decisions on key elements of their businesses.

Ireland is open for business as these companies make decisions about the location of operations and implementation of their plans.

Deirdre Power is head of financial services tax at Deloitte