Ireland’s banking and financial services sector is now in the grip of forces that threatened to undermine the skill base built up over several generations. They also threatened the choice and competitiveness of the services available to retail customers as well as businesses. Job losses on the scale of the Ulster Bank’s cutbacks — and the knock-on effects — will further reinforce contractionary impact in the labour force and in the wider economy.
These job losses come on top of earlier redundancies, including cuts announced by Aviva insurance last year as well as an ongoing contraction in banks.
A key point about these most recent job losses is the numbers — and the shock to individuals working within the long established and highly innovative bank, with wide connections within the economies — north and south. It is the fact that they are happening at a time when Ireland-headquartered banks have scaled back the international reach of their activities.
Ulster Bank’s presence as part of a major global group is of key importance to the overall capability available to Irish businesses. It is the specialised activities in which the cuts are taking place that is of major importance.
They re-enforce the losses of high quality jobs, based in Ireland, which served AIB’s profitable activities in Britain, Poland and the US. Once these jobs are lost, they are near-impossible to rebuild: They represent the loss of an important dimension in overall competitiveness of the economy and its responses to the needs of the Irish economy.
The enforced scaling back of the international activity of RBS — Ulster Bank’s parent company— is a major factor in the announced job losses, but there are others. These include, the continued contraction of the economy and also the enforced downsizing of the Irish banking and financial sectors arising from the bailout.
Some contraction and restructuring was imperative because of the highly negative role played by the unjustified expansion of credit at the heart of the financial crises. However, the scale of job losses has now reached significant and potentially very serious dimensions. There is a real danger of a “negative” cycle, feeding upon itself, as it erodes Ireland’s banking capabilities, the history of which stretches back to the 18th century.
Financial services are an important pillar for the reconstruction of a small and internationally focused economy. The negative effects of the loss of these high-skill jobs cannot be over-estimated. It threatens to emasculate a once highly successful and innovative financial services sector, compounding the effects of self-inflicted wounds and doing great damage to Ireland’s competitiveness, and to employment.
*Professor Ray Kinsella is on the Faculty of the UCD Michael Smurfit Business School.