OPINION:Chairman of new body will target resources to fix financial sector's damaged reputation, writes ALASTAIR BLAIR
JOHN BRUTON’S appointment as chairman of the newly established International Financial Services Centre (IFSC) Ireland is very much to be welcomed and comes at something of a crossroads in the relatively short life of one of this country’s most widely acknowledged economic success stories.
The IFSC has been a key driver of our economic prosperity over the past decade and, although it now faces a number of challenges in the aftermath of the credit crunch and in the context of the international and, more specifically, domestic recession, it still remains a hugely important cog in the economic wheel that turns our economy. Its contribution is probably greater than is generally understood because of the largely uncharted benefits that accrue to the economy through the diversity of its operations.
Bruton’s goal will surely be to re-invigorate the reputation of the IFSC and reinforce Dublin’s position as a leading centre for financial services – not only in Europe but also globally.
Perceptions of Ireland as a world-class global financial services centre have been challenged and this is reflected in the IFSC’s fall from sixth to 23rd place in the Global Financial Centres Index, last measured in November 2009. Competition from other centres for the lucrative inward investment and added-value jobs in international financial services that continue to be created, notwithstanding the economic downturn, is intense.
Under the umbrella of IFSC Ireland, Bruton will now be in a position to marshal all our resources – political, State, State agencies and the private sector – in a collaborative and co-ordinated campaign of action if we are to protect and build our leadership position. And it’s a position worth protecting.
At its peak, the IFSC employed 25,000-plus and attracted some 450 institutions providing varying financial services. However, this may well understate the real importance of the IFSC in employment terms. Separately, the IFSC has been a significant contributor to the exchequer, accounting for some 7.5 per cent minimum of gross domestic profit at its peak. Corporation tax revenue from the centre yielded €850 million in 2008 but again, this probably understated the real return.
In the context of the past 18 months of unprecedented economic and financial market turmoil, a key challenge for the IFSC sector is to manage the optimal balance between skills, productivity and the cost of resources. Financial services companies globally are under immense pressure to re-establish and reposition themselves and, in the process, deliver greater efficiencies and improved cost competitiveness. This means that the IFSC will need to compete more strongly, not only in terms of tax and talent, but also in terms of cost.
Arguably, Bruton’s most important task will be to address any immediate reputational threats to the IFSC which have stemmed from Ireland’s economic woes and which have been accentuated by the significant challenges dominating the domestic banking and insurance sectors.
Bruton will need to promote the IFSC as a destination for international businesses, to strengthen our international relations, and ensure Ireland enjoys a sustained high profile at key international events.
The credit crunch has ensured that the short- to medium-term outlook for international financial services centres is likely to remain challenging.
But the outlook is encouraging, especially as global economic conditions improve, albeit slowly.
Innovation and R&D, a key plank of the Government’s medium-term economic framework (Building Ireland’s Smart Economy) hold significant growth opportunities for IFSC companies. Some early examples that hopefully will inspire other multinationals to follow suit include Citigroup, which has established an innovation centre as part of its IFSC operations.
In this regard, Ireland’s established indigenous IT skills base will also strengthen Bruton’s hand.
The IFSC can once again play a key role in the revitalisation of the Irish economy, as it did in the past when it was first established.
In John Bruton, we would seem to have found a champion who possesses all of the important attributes required to achieve this outcome. It is in all our interests that he succeeds.
Alastair Blair is head of financial services with Accenture in Ireland