Skills shortage threatens Dublin’s post-Brexit finance boom

Hopes for a post-Brexit financial services boom are coming under threat from a skills shortage that could curb the Central Bank’s ability to keep up with a surge in licence applications.

Minister for Finance Michael Noonan last week admitted the Central Bank of Ireland (CBI) – which he said wants to hire an extra 170 staff next year – is already struggling to compete with the private sector for the talent it needs and cannot put a timeline on how long it will take to deal with complex licence applications.

And insurance industry insiders said private companies were also already struggling to hire in some areas, a situation that will only get worse if the insurers that are considering moving their EU headquarters from London to Dublin go through with their plans.

As the only English-language speaking country in the EU, and already home to a sizeable international financial services centre, Ireland has long been an obvious destination for financial services companies who may have to move their EU headquarters from the UK after Brexit.

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Insurers are particularly keen – several have already started the formal process of setting up subsidiaries, while others are still doing the groundwork to join the 200 insurers already regulated in Ireland – but banks reported a cold reception from the Irish regulator.

Easier said than done

Last week Ireland’s financial regulator Cyril Roux insisted there was no unwillingness on Ireland’s part to take on any investment banks and that the regulator would recruit new staff as needed. But staffing up the CBI is easier said than done.

In a response to a parliamentary question, Mr Noonan said the CBI wanted to increase headcount by just over 9 per cent next year, with at least 28 of those new people working directly on Brexit and others drafted in for Brexit work as needed.

Mr Noonan admitted the Central Bank “can sometimes experience difficulties in hiring and retaining staff in certain areas simply because there is significant labour market competition”. This competition, which he described as a “challenge” for the CBI, is expected to intensify as other financial services companies begin to hire more in Ireland.

The Minister for Finance gave no indication that he would lift the pay caps introduced during the financial crisis which the Central Bank says are an impediment to recruitment. Paul Walsh, head of Dublin-based actuarial recruitment group Acumen, said staff moving to the Central Bank can expect to earn between 10 and 30 per cent less than they would in the private sector by the time a public service pension levy is factored in. "It's very difficult, they [the CBI] struggle to get people," he said.

Staff shortages mean it will be harder for the Central Bank to deal with licence applications in a timely manner. Eddy Van Cutsem, chief executive of insurance industry group Dima, says there have been "a lot of enquiries" from insurers already. "The companies that already have some business in Ireland will add to it – it would be a natural development," he said.

Banking industry insiders say they have been told it could take up to two years for the licensing process. The CBI denied this but Mr Noonan said he could not give a firm timeframe on how long licensing would take.

‘Challenge on the talent side’

Mr Walsh said the insurance industry at large faced a shortage of general insurance actuaries and that he often had to “import” these in for new roles. “We struggle today as it is pre-Brexit, we would definitely struggle post-Brexit,” he said. Mr Walsh’s annual survey of actuarial pay for 2015 showed the first year of consistent pay inflation he has seen. Kevin Thompson, chief executive of Insurance Ireland, said while there was a “challenge on the talent side”, it was “a gap we can fill”.

Property is another challenge facing Dublin. The Irish capital lacks the type of high-quality city-centre rental accommodation that appeals to the well-paid, well-housed employees of the global banking industry. “It’s beginning to appear on the market, but we need much more of it,” said Peter Collins, managing director of Kennedy Wilson Ireland, the developer of the Hailing Station, a new 23-storey mixed use development in Dublin’s financial services centre that will be ready for occupancy in 2019.

According to estate agents Savills, 12 million sq ft of new offices are planned for the city over the next five years – enough space to house 100,000 workers.

Andrew Cunningham, director of offices at Savills Ireland, said about half of that should come on stream by the first quarter of 2019, by which time the impact of Brexit on the City of London, and on the future of the global and Irish financial industries, should be clearer.

– Copyright The Financial Times Limited 2016