| Challenge will be to restore competitiveness - The various submissions made by the financial services industry associations to Minister for FINANCE Charlie McCreevy in advance of the Budget 2004, and which are reported on to some extent in this issue all have a common message. |
Challenge will be to restore competitiveness
The various submissions made by the financial services industry associations to Minister for FINANCE Charlie McCreevy in advance of the Budget 2004, and which are reported on to some extent in this issue (See page 3,8) all have a common message: bring back competitiveness.
Ireland’s competitiveness has declined rapidly over the past number of years, and in the recently published Global Competitiveness Survey, produced by the World Economic Forum, Ireland fell seven places to 29th. In 2000 Ireland ranked fourth in this survey, but now lies behind countries such as EU accession countries Estonia (22) and Malta (19), as well as close financial services competitor Luxembourg, which is in 21st place.
As a small, open economy, Ireland has thrived, particularly in attracting international financial services institutions, by being, amongst other things, a low-cost location, with a flexible business-friendly regulatory regime, as well as a highly skilled workforce. However, while the strength of two of the above factors is being diluted as a result of global factors, it is also being damaged by policies initiated by the Government.
For example, the cost of employing staff in Ireland has risen over the past number of years, driven by a number of anti-competitive measures such as the removal of the ceiling on employers‚ PRSI. This problem looks set to be exacerbated with the announcement that a number of benefits enjoyed by staff will be eligible for PAYE/PRSI from January 1st 2004.
Financial Services Ireland (FSI), the industry lobbying association, is firmly against any increases in labour taxation, as they say that the decision in Budget 2003 to extend PRSI and the health levy to benefits in kind by employers has had a negative impact, at a time when net growth in the private sector is weak, and that this measure has impacted negatively on high-value added well-paid employment. With regards to the removal of the ceiling on employees‚ PRSI, FSI argue that this should not be removed as it would be similarly damaging, leading to additional wage pressures.
The other factor impinging on Ireland’s competitiveness is the threat of over-regulation, which is being posed by regulatory developments such as the Companies Bill. Paul Dobbyn, a partner with A&L Goobody, recently expressed concern that, ‘Legislation has become over-invasive and disproportionate to the menace which it is seeking to prevent or cure.’
The Government must address the industry’s concerns on these matters, and ensure that in the 2004 Budget, nothing is introduced which will further damage Ireland’s competitiveness as a location for financial services.
Stockbroking
With this month’s issue of FINANCE comes a special supplement, ‘Stockbroking in Ireland’, which features the annual stockbroking survey conducted amongst Irish and leading international institutional investors in Irish equities.
The stockbroking industry has had a difficult few years, with the prolonged bear market, and the trend for de-listing from the Irish Stock Exchange. However, the industry is still going strong. The Finance annual survey is the most comprehensive such survey by far, and provides the fullest and truest picture of stockbroking on a year to year basis. The survey is intended to contribute to the vitality of this boutique industry, and the major Irish stockbroking firms are successful equity broking boutiques on the international equity landscape - a factor that the respondents, we have found in the course of conducting the survey this Autumn, have warmly welcomed.
One interesting trend which may emerge next year is the re-listing of companies, that previously went private. For example, there is talk that both eircom, which delisted after its purchase by Valentia, and Jefferson Smurfit, which went private when it was acquired by Madison Dearborn, may return to the ISE next year. This would be a dream scenario for brokers, as not only have they made money through advising the firms on the takeovers, but they may also make money through bringing them to market again. |
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| Article appeared in the November 2003 issue.
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