Ladies and Gentleman a very good morning to you all.
I am delighted to be here with you this morning at the 4th annual Irish Funds Symposium, it is fantastic to see such a showcase for the Irish funds industry in a financial services hub like London.
It is always a pleasure for me to visit London no matter how short the visit given the substantial links from economic, social and political perspectives between London and Ireland.
In respect of the funds industry, this subsector of financial services has served Ireland very well for many years and I certainly believe there is even more scope for the sector’s continued development; events like today are crucial in continuing the growth of the industry.
I would like to begin with an overview of Ireland’s current economic situation. Ireland’s economic recovery is now firmly established. Robust growth has been recorded across all sectors with both exports proving strong and also significant growth in domestic demand.
GDP grew by 4.1 per cent in the second quarter on an annual basis and this follows an increase of 3.9 per cent in the first quarter of this year.
Our recovery is perhaps most clearly evident in the labour market with annual employment having increased in each of the last fifteen quarters, representing an increase of over 180,000 jobs since the low-point in 2012. There are now over 2 million people in employment in Ireland for the first time since early 2009.
This recovery has not happened by accident. It is the result of the firm application of prudent and consistent fiscal and economic policies.
The outlook for Ireland is also positive with the Department of Finance forecasting real GDP growth of 4.2 per cent in 2016, and 3.5 per cent in 2017. These forecasts align with the European Commission’s projected growth of 4.1 per cent in 2016, and 3.6 per cent in 2017.
Funds in Ireland
When it comes to financial services, Ireland’s development in this area has been extremely impressive and a significant part of this success has been due to the funds industry.
We now have some 6,000 funds domiciled in Ireland, managing close to €2 trillion of assets.
The success of the Irish funds industry is built on Ireland as an attractive domicile for promoters from the UK, Continental Europe, the United States, and beyond.
Our aim is to provide a welcoming business environment and a responsive regulatory environment. This supports thousands of jobs directly and many more indirectly.
Industry engagement with Government is important in achieving our shared goal of growth and development. That engagement covers both domestic developments and our policies in relation to legislation coming from Brussels; we have a strong track record in standing up for proportionate and effective regulation. With this in mind, I want to highlight some recent positive developments in the area of funds.
Money Market Funds
After more than three years, discussions on the Money Market Fund Regulations have now completed in Council and trilogues between the Council, the Commission and Parliament are in the final stages.
Ireland has been vocal in its defence of viable alternatives to Constant Net Asset Value funds throughout this process and we have managed to ensure that serious threats to the viability of Ireland’s Money Market Funds were removed.
Our aim has always been to ensure an outcome where the final outcome represents a fair and viable outcome for our Money Market Funds sector.
Finally, last year saw the Irish Collective Asset-Management Vehicle legislation enacted. I am pleased to note that more than 200 Irish Collective Asset-Management Vehicles are already in existence. In the year since the enactment we have also added several jurisdictions to the list which can avail of the fast-track re-domiciliation procedure.
An important part of Ireland’s strategy to develop its international financial services sector and to take advantage of the growth in non-banking finance in Europe is to make Ireland a more attractive domicile for private equity funds.
On the legislative front, the Department of Finance, with support from Irish Funds, is currently developing proposals for amendments to the Investment Limited Partnership legislation to extend the kinds of benefits offered by the Irish Collective Asset-Management Vehicle to other fund types.
The development, in particular of the private equity fund sector, is a priority as outlined in our strategy for the development of the international financial services sector and timed to take advantage of the Capital Markets Union agenda to promote the establishment of private equity and venture capital funds vehicles in Ireland.
Until now our partnership regime has not appealed sufficiently to private equity managers. The Irish Department of Finance is working on new legislative proposals to remedy that.
We want to ensure that the Irish investment limited partnership structure meets the needs of fund managers as well as or better than similar structures in competing jurisdictions and I would like to acknowledge the work done by members of the fund industry in pushing this process forward.
Draft heads of a Bill are now at an advanced stage and while I cannot, of course, disclose the precise details we hope to be in a position to publish a comprehensive Bill shortly.
The work we are doing is, amongst other things, focused on:
the possibility of using umbrella fund structures with Investment Limited Partnerships;
copper-fastening the position of the limited partnership to ensure that limited liability operates in a manner similar to other jurisdictions;
ensuring that there are no needless burdens in Irish partnership law on the managers of alternative investment funds in light of the implementation of the European Alternative Investment Fund Managers Directive; and
Providing that the level of information publicly available on the funds, their managers and investors is consistent with that in our competitor jurisdiction
I could not speak here today without discussing Brexit. While not the result the Irish government had hoped for we fully respect the decision of the British electorate.
It almost goes without saying that Ireland remains very strongly committed to our membership of the European Union and the Eurozone.
EU membership remains central to the success and the development of Ireland’s economy and we look forward to continued economic growth through cooperation with our European partners.
A stable, prosperous, and outward-looking UK is clearly in our own interests and those of the EU as a whole. The closer the UK is to the EU, the better for all of us, and above all for Ireland.
In anticipation of the UK triggering Article 50 the Irish government has taken significant steps in Budget 2017 to ensure Ireland will be ready to weather any potential economic fallout from the UK leaving the EU.
Budget 2017 reaffirmed Ireland’s 12.5 per cent corporation tax rate, this rate will not change and highlights Ireland’s stable and consistent tax structure which has been so essential in attracting foreign direct investment.
The government will also establish a ‘Rainy Day’ fund, this fund will involve the setting aside of an amount of up to €1 billion annually as a contingency measure should it be required if economic shock occur.
Other measures include the reduction in Capital Gains Tax to help entrepreneurs, the Foreign Earnings Deduction extension and amendment, and the extension of the Special Assignee Relief Programme (SARP). All will be crucial in positioning Ireland in these uncertain economic times.
The Government will continue to implement its clear strategy for driving growth in the international financial services sector. We will continue, through IDA Ireland, to promote the attractiveness of Ireland as a location of choice for mobile international investment and for talented people.
We know that there will be opportunities for Ireland arising from Britain’s decision to leave the EU. We will, of course, seek to take those opportunities, many of which already form part of the IDA Ireland’s marketing strategy. The IFS2020 Strategy I discussed earlier has been in place long before the UK decision to leave the EU but it nonetheless provides a clear roadmap to maximise any opportunities that might arise.
The development of Ireland’s international financial services industry has crucial in Ireland’s economic growth in past 30 years. The sector now provides employment to over 38,000 people across over 400 Irish and multinational companies located the length and breadth of the country.
Although Ireland has become firmly established as a financial services hub it is important that we must not get complacent, particularly given the competitiveness of the global economy.
In 2015 the government launched the IFS2020 Strategy as way to ensure the continued growth of international financial services in Ireland for the next 5 years. The strategy aims to grow employment in international financial services by 10,000 by 2020 and I am pleased to say figures indicate we are well on track to achieving this.
In order to fulfil this goal the strategy aims to position Ireland as a leading location for specialist international financial services. Ireland is already a recognised global leader in a number of sectors, including, of course, the funds industry.
The Irish funds industry offers world-class, innovative product solutions catering to the widest spectrum of investment strategies. The industry has developed a centre of excellence with expertise that spans a wide range of services including fund administration, transfer agency, custody, legal, tax and audit services, compliance, stock exchange listing, and consultancy services.
Action Plan 2017
In terms of looking forward to 2017, the IFS2020 Strategy is a dynamic and evolving strategy which takes on board developments, both domestically and internationally.
The annual Action Plans allow flexibility and enable the strategy to adapt and evolve to ongoing economic developments.
The Department of Finance is currently consulting closely with all stakeholders, including the funds industry, as we prepare the next iteration of actions for 2017.
IFS Ireland Brand
One of the key strategic goals of the IFS2020 Strategy is the promotion of Ireland’s financial services sector abroad, including the launch earlier this year of our new banner brand IFS Ireland.
The IFS Ireland banner brand is now the shared identity which all IFS stakeholders, Government and industry bodies, will use to promote Ireland on the international stage. When financial services stakeholders around the world see the IFS Ireland brand, we want them to know it means specialization, talent, innovation and excellence.
And I must thank Irish Funds in particular for their significant dedication to the brand and their assistance in the promotion of the brand. In the past 12 months Irish Funds have provided the essential role as secretariat to the IFS2020 Industry Advisor Committee. The part they have played has been crucial in ensuring effective engagement between the public and private stakeholders and the ongoing success of the strategy.
European Financial Forum
As this event today is a platform for the Irish Funds industry the Irish government will host our own financial services showcase on the 24th January 2017. The European Financial Forum was first held in January 2016 and was a tremendous success, with over 600 delegates from twenty seven countries in attendance.
The forum will see senior regulators and policy makers come together with leading figures from the financial services industry to debate and discuss the major challenges facing the European and global economy.
We have a number of high profile international speakers in attendance this year including Vice Chairman of Blackrock, Philippe Hildebrand; former Commissioner of the U.S. Securities and Exchange Commission, now President of Patomak Global Partners Daniel Gallagher; and Member of the Board of Directors of Credit Suisse and Chair of the British Bankers’ Association, Noreen Doyle.
To conclude I hope I have given you a flavour to how committed I as Minister of State for Financial Services and the Irish government is to the continued growth and development of financial services.
In such uncertain international circumstances it is essential that we all work together to ensure Ireland can maintain its status as a destination of choice for international financial services investment.
I am confident that the work of Irish Funds and the IFS2020 Strategy will see the continued growth of Ireland as a global financial services hub.