Sometimes, to understand where you are going, you must know where you are coming from. 

In the mid-1980s, Ireland faced dire economic challenges: soaring unemployment, crippling national debt, and mass emigration. Yet, amidst this adversity, the seeds of Ireland’s financial services industry were sown.

Back then, the IFSC in Dublin was a mere wasteland. However, as Colin Ryan – Financial Services Managing Partner with EY Ireland – argues, a series of bold and ambitious decisions were made to help transform both the area and the sector it serves as the centre of.

“The IFSC did not just happen by accident,” Ryan says, listing out a series of policy decisions including the creation of a special economic zone, government initiatives, private investments and public-private collaboration. 

“There was a lot of ambition to it, but there was a lot of infrastructure built that actually got us to where we are today.”

Now Ryan, believes it is time to make a new set of bold and ambitious decisions to drive the sector to the next phase of its evolution.

More than 120,000 people are employed in the financial services industry in Ireland across 8,800 companies, with the sector generating €6.8 billion annually in tax revenue. Just over six per cent of worldwide investment fund assets are domiciled here in Ireland, making it the 3rd largest global centre for funds, while Ireland remains the dominant jurisdiction for aviation finance.

However, if key competitive advantages and opportunities are harnessed, Ryan and EY believe the numbers could rise even further. 

A new report from EY, Building a Better Financial Services Ireland: Accelerate to Elevate, states that the sector could grow by 26 per cent by 2028, while the number of people employed in financial services could increase to 168,000 in the same period. When compared with the baseline forecast, EY believes that the gross value added in the sector could rise by a hefty €3.4 billion by 2028.

However, just like in the 1980s, Ryan says this will not happen by accident. Instead, with a growing number of international jurisdictions actively targeting the sector, he says Ireland needs to take action if it is to maintain momentum.

“Are we making bold decisions? Are we planning for the future?” he asks.

“Or is there perhaps a risk we might just hope or assume that this growth will continue?”

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In recent months, Colin Ryan and his team at EY have been busy interviewing and gathering insights from 140 of the most senior financial services leaders across Ireland, gauging their views on the headwinds and tailwinds facing the financial services sector in Ireland.

They also sought to benchmark Ireland internationally. First, they examined the ten fastest-growing financial services markets globally, identifying the common characteristics in each jurisdiction. They then examined how Ireland compared to each of them across five key metrics: technological infrastructure, talent, international trade, regulatory and legal framework, and macroeconomic fundamentals.

Based on the international analysis, three countries came to the fore: Singapore, Switzerland and Luxembourg. EY then conducted a deep dive into the various policies and frameworks of those three jurisdictions to see how Ireland compared, and what policies and incentives it could copy and improve.

The results of this assessment, as well as the views of the various industry leaders, are all contained in the new report. 

“The locations that are growing quicker, getting more investment, pulling away from the pack, all have very strong characteristics,” says Ryan.

 “So, what is it that these countries are doing? Is there more we could do to learn from them, or even leap ahead of them?”

Based on this, EY has identified a series of policy recommendations covering everything from investment in green finance to Ireland’s regulatory framework. 

The key, Ryan says, is to be proactive and agile in an increasingly uncertain and competitive global environment.

 “It is essential to reinforce the strengths that have historically set Ireland apart while also embracing new opportunities in areas such as sustainability, digital transformation and financial innovation,” according to Ryan. 

Ryan’s message is clear: “Now is the time for action.”

Harnessing innovation

In the same way that Ireland built a global financial services hub, it has also become a home for tech multinationals, many of whom are clustered near the IFSC in Dublin’s so-called Silicon Docks. However, despite the physical proximity between the two sectors, the view from the majority of those surveyed by EY was that there is not enough collaboration between the technology and the financial services sectors.

Ninety-two per cent of financial services leaders said ‘There’s more we could be doing here’,” according to Ryan.

When analysing the leading financial services sectors globally, the research pointed to the fact that Switzerland had attracted a high volume of tech companies through its innovation-friendly policies and “high R&D investment, which create an environment that fosters research and stimulates growth via Innousisse, the Swiss innovation agency”. Singapore, meanwhile, had leveraged public-private partnerships to create an “advanced nationwide information infrastructure” connecting computers in nearly every home, school and workplace. 

Ryan added that Ireland’s technology ecosystem needed to be harnessed more efficiently to support innovation. Ryan argued that Ireland had become a leader in exchange-traded funds (ETFs), but said technology investment could help Ireland carve out a similar position in the area of digital tokenisation. 

“I’ve no doubt we have the technological capability in the country, but are we fusing those skills into the sector at the right rate?” he asked.

The EY report recommended that Enterprise Ireland and the Department of Enterprise, Trade and Employment establish cross-sector collaboration amongst technology firms, academia and industry on specific areas including real-time payments, responsible AI, cybersecurity, digital identity, regtech and sustainable finance. It added that those sectors should be targeted with funding and tax incentives.

“We can’t be great at 20 things as a country,” Ryan said. “ We need to pick three or five areas in FS and target investment into them – get the collaboration going across these areas and make a statement internationally as to what Ireland wants to be known for.” 

Deepening the talent pool

According to the research, the strength of Ireland’s domestic talent pool is viewed as a core advantage for the sector compared to international peers. However, the report says there is work required to attract and retain top talent, and that there are “headwinds” in relation to infrastructure, the elevated cost of living and the potential for skills shortages.

According to the research, 87 per cent of business leaders viewed demographics and labour supply as an important lever to Ireland’s future standing as a world-leading financial hub, while more than a fifth view Ireland’s highly educated workforce as a key advantage. However, 31 per cent referenced barriers to attracting top-tier talent, while 32 per cent cited housing affordability as a significant disadvantage. 

The report referenced Sweden, which grew its female labour participation rate from 76 per cent in 2010 to 81 per cent in 2022 by improving access to childcare through a range of government subsidies, tax deductions and employer contributions, as well as enhanced parental leave policies. Switzerland, meanwhile, offers various support programmes to upskill and invest in coaching services while the Singaporean government provides SkillsFuture credits to all citizens aged 25 and above, which can be used to pay for courses and training programmes. 

The EY report said that Ireland needed to introduce targeted incentives to attract the right talent and implement training programmes to advance current talent in emerging financial services areas. It also recommends that the government, industry and universities create a “talent-focused” approach to education, while policies should also encourage the development of financial services hubs in cities like Cork and Galway, to “broaden talent distribution while ensuring a sustainable and highly skilled workforce for the sector’s future growth”.

According to Ryan, all of the stakeholders identified the need for “a very specific future skills programme for financial services”. 

“ We need to pick those specialist areas, work from colleges up and work within the existing workforce to create those skills and that supply,” he said, adding Ireland could develop specific industry hubs in different regions.

“I think there’s an opportunity for the industry to access more talent globally for us to build hubs of specialism in different locations.”

Ireland’s regulatory and legal framework

Ireland’s legal and regulatory environment was viewed as a key driver of past growth – 81 per cent of those surveyed regard Ireland’s regulatory and legal systems are key to its standing on the global stage, while the stability of Ireland’s common law system was viewed as an important advantage by a quarter of respondents. 

However, many key decision-makers interviewed by EY emphasised the struggle that start-ups face if they require any kind of regulatory licence and the challenges that regulatory divergence presents to operations across multiple jurisdictions.

EY said that the UK had introduced innovation hubs and regulatory sandboxes for its fintech sector, which had subsequently attracted significant venture capital. Fintech now accounts for 30 per cent of all venture capital funding in the UK.

“Ireland has had a great reputation. Take the complexities of international tax and the numerous bilateral tax treaties that we have in place. They facilitate a lot of the operations that are here today,” Ryan said, adding that Ireland also offered great certainty on tax.

Ryan said that regulation was strong in Ireland, referencing the Central Bank’s recent sandbox initiative for the fintech sector. However, he said there was a sense that regulation was becoming increasingly complex. “It’s not about trying to remove regulation, but to work to try to simplify it,” he said. “There is an opportunity cost.”

The report recommended the establishment of a “collaborative Financial Services AI and Cyber Working Group” made of participants across the public and private sectors, as well as a “multi-year secondment programme” to encourage financial services professionals to work in public sector roles and vice versa.

“The big thing we have to do is to signal outside of the market that we are open for business, that we are an innovative financial services sector and that the Regulator will continue to work alongside those entities to evolve quicker and together,” Ryan added.

Cross-border and trade environment

The report states that Ireland’s position within the EU single market confers a powerful advantage in the sector. Some 92 per cent of leaders surveyed it as being important to Ireland’s future as a world-leading financial services hub. However, they also saw opportunities “to address specific regulatory challenges and strengthen the sector’s global alliances”, according to the EY report. 

For 20 per cent of survey respondents, proximity to major European financial centres was an advantage, while this figure rose to 56 per cent of those running businesses with a turnover of more than €50 million.

“Ireland’s location today as a hub, as an English-speaking language, with common law and gateway to Europe, is extremely strong,” said EY’s Colin Ryan. “We have to maintain what we have. That takes cultivation. It takes clear signalling to the market. “It’s watching those mechanisms, those bilateral agreements that are in place that facilitate that trade. It’s constantly making it easy to do business in Ireland.”

Ryan pointed to other international hubs, which have rolled out a range of specialised vehicles and incentive programmes to target “specific sub-sectors” such as private equity and aviation finance. 

He namechecked Luxembourg, which has created specialised financial vehicles, such as the Société d’Investissement en Capital à Risque (SICAR) and the Société de Participations Financières (SOPARFI), which are tailored to the needs of international investors and private equity firm.

Within the aviation finance sector specifically, Singapore’s Aircraft Leasing Scheme (ALS) and Aircraft Investment Manager (AIM) incentives seek to incentivise companies to develop aircraft leasing capabilities, supporting the growth of Singapore’s leasing industry, according to the report.

The EY report recommended that Ireland offer financing solutions and investor protection policies to support the international expansion of Irish financial services companies and maintain the existing corporate tax rate regime.

It said that Ireland’s financial services brand should be developed internationally and “focus on Ireland as a pivotal European and global capital markets integrator, highlighting the role it plays in the international funds market, the volume of international FS organisations located here”.

The macro environment

Some 74 per cent of financial services leaders view Ireland’s macro and policy backdrop as an important driver of the sector’s future growth. However, the report said that the “bureaucracy of policymaking in the market” is viewed as a headwind to innovation, while uncertainty over the future corporation tax environment remains a key focus. 

It said the world’s fastest-growing financial services hubs are characterised by coordinated backing and investment for start-ups and innovation. For example, Luxembourg provides innovative structuring tools such as white-label vehicles that are conducive to a VC-friendly ecosystem, while top-ranked Switzerland invests 3.2 per cent of GDP in R&D.

“The market backdrop for supporting technological infrastructure and innovation is viewed as a disadvantage by three per cent (net) of respondents, particularly in green finance and sustainable investing,” according to the report. “19 per cent of financial services leaders cited the high cost of upgrading technology as a barrier to growth.

The report recommended that Ireland “re-envision” the areas of specialisation that it can develop as the foundation for the next wave of growth in the FS sector”.

In particular, it said the country should “review the tax environment for green funds” as the COP29 announcement in relation to Article 6 of the Paris Agreement provides an opportunity for Ireland to position itself strategically as a global hub for the operationalisation and implementation of this new international instrument.

It also said Ireland could become a leader in funds tokenisation, payments and fintech if the right policy choices were made. It also suggested that Ireland boost investment activities and retail investor “participation through focused policies such as the Swiss Financial Services Act” for investor protection and develop a “financial awareness campaign for retail investors” across Ireland to invest in Irish mutual funds.

“Our belief is by picking areas of specialism, by looking at talent, by fostering innovation and R&D with the capability we have here in the technology sector with academia, by protecting the cross-border and trade mechanisms that we have, and actually saying ‘We’re open for business’ and getting better and partnership between regulator, legislators and the industry, we can really do this,” said Colin Ryan.

“We have all of the raw material, we just need to make sure that we’re focused.”

This is partner content and has been produced in association with EY. For further information click here.