‘Brexit risks’ as Barclays to set up in Dublin
UK economic growth hadn’t slackened but risks lie ahead as some sort of hard Brexit deal looms large, the bank said in its quarterly report, noting Irish-owned manufacturing industries had experienced a softening in demand even before the sharp slump in the value of sterling six months ago
The Central Bank said it had received in all 100 inquiries from UK-based banks and investment funds who were at an early stage in weighing possible new homes in the EU should they barred from selling financial services from London, if the UK strikes a hard Brexit deal with Brussels.
It emerged yesterday Barclays Bank had settled on Dublin for its main hub inside the EU after Brexit and is planning to add about 150 staff to its operations here if UK-based finance companies lose easy access to the EU. The bank already employs about 100 staff in Ireland.
The bank started scouting Dublin for office space this month and has been in contact with Irish regulators about expanding its operations. But there could be a downside effect here to house prices rise as foreign workers seek homes.
Gabriel Fagan, chief economist at the Central Bank, said that any influx of foreign bank personnel could affect house prices because the shortages of supply are so acute. The market could need more than 25,000 new homes a year to meet demand, he said, and Irish home buyers would likely need to put more of their income aside to buy a house in the coming years.
Mr Fagan said the outlook for the Irish economy was something of a “mixed bag” as more jobs and modest wage increases lifted domestic deamand amid risks from a hard Brexit deal and cuts in US tax rates.
It cut its GDP forecast this year to 3.3% from 3.6%, mainly because of the effect of slower global growth on Irish exports. It projects growth will slow to 3% in 2018.
It was “implausible” the Irish economy would fare worse that the UK’s under a hard Brexit, Mr Fagan said. Reform and cuts in US corporate tax rates pose a “key” risk because US multinationals employ 150,000 people here.
Bloomberg reported Barclays was moving ahead with contingency plans so it can continue serving EU clients if UK prime minister Theresa May fails to strike a transitional or permanent deal preserving London’s access within the two-year renegotiation period.
Barclays staff moved to or hired in Dublin could include senior managers, derivatives specialists, currency traders, compliance and human resources staff.
Separately, Merrion Capital said it is more cautious of stocks overall because of the huge rally by stock markets since the election of Donald Trump in November. In its global investment outlook, it said US tax cuts could boost earnings of US companies, but Trump’s protectionist instincts and ‘America First’ policy concerning world trade may lead to higher tariffs and restrictions to world trade.
The UK could be affected in time when the Brexit trade deals become a reality, while elections on the continent this year mean another “volatile” year for investors, the broker said.
