The road to Brexit, and namely to March 2019, is an uncertain one. The road after Brexit is just as uncertain.
In an interview with PYMNTS, Michael D’Arcy, who serves as minister of state at Ireland’s Department of Finance, delved into what might await his country beyond the upheaval.
Among the issues that bedevil the transition include what happens to U.K. companies post-Brexit – namely, whether they will be able to sell into the European Union once the divorce is final.
It’s the concept of passporting, of course, that allows firms operating within one nation already part of the European Union to do business across the union at large.
Of course, that union goes from 28 members to 27 come next March, as the United Kingdom, including Northern Ireland, leaves. The Republic of Ireland is staying in the EU.
Sitting down with PYMNTS on Wednesday, the minister said that Brexit offers both challenge and opportunity for his country, even as several questions remain about how Brexit may eventually take shape, impacting everything from financial services to trade.
“There’s a misconception that some countries are trying to benefit from the divorce” put in motion by Brexit, he said. “I don’t use the term ‘benefit’ at all. What I do is I try to explain … that there are companies that may have serious difficulties that are U.K.-based that in a short period of time potentially will not have the opportunity to passport into EU 27.”
And here it is that some uncertainty reigns.
“Negotiations are happening,” he told PYMNTS, with a nod toward a June summit in Brussels that, in part, would deal with trade and issues tied to the Irish border.
Touching on trade between Ireland and the U.K., D’Arcy noted that the value at stake is significant, as trading activity is worth as much as one billion euros weekly. “If there is really a hard border, it is difficult to know how that will play out,” he told PYMNTS, and there is no surety as to what tariffs might look like.
He mentioned the “backstop agreement” reached earlier this year between the U.K. and the European Union and Britain, dictating that there be no “hard” border on the island. That agreement would also mean that Northern Ireland would be tied to the EU’s trade rules.
But D’Arcy also said he would not hazard a guess as to what the outcome might be. Noting his friends on both sides of the political corridor in Westminster, he added, “it is a difficult period right now. It is hopeful that common sense will prevail and a deal will be arranged.”
It is in financial services that Ireland will see continued traction, and attraction, as companies across the spectrum look for continued presence within the EU. As has been widely reported, some financial marquee names, such as Merrill Lynch and JPMorgan Chase, have said they are bringing at least some of their operations to Dublin.
Last year, too, the Bank of China established branch operations in Dublin. The move may be a tip of the hat to Ireland’s arguably central location between the U.S. and Asia. More on that later, but D’Arcy was quick to point out to PYMNTS that the shift by financial firms to bring operations and assets to bear in Ireland does not signal an emergence, but rather a continuation.
“I would say that Ireland isn’t becoming a hub – Ireland is a hub,” D’Arcy said. He noted that 4.2 trillion euros of assets were under management in Ireland at the end of last year, cutting across banking, reinsurance, FinTech and any number of subsets across the financial arena.
Against the sea changes wrought by Brexit, D’Arcy also stated that “we’ve been strong in expressing the view that we can be not just the gateway, but the bridge between the East, [including] China … in relation to trade and the U.S. (thus having a positive impact on the latter).
“If you get on a plane to Dublin and fly to Beijing, it’s 11 hours,” he continued. “If you get on a plane in Dublin and fly to Los Angeles, it is about 11 hours.” He also noted that common law and common language between the U.S., the U.K. and Ireland may also auger well for shared resources.
Asked about FinTech, D’Arcy seemed sanguine on businesses using technology to transform financial services even post Brexit. “You don’t stop innovation,” he said. “You don’t put the genie back in the bottle.” He noted that firms as diverse as Google, Apple, Square and Stripe have based their EMEA-focused operations in Ireland, including, in some cases, research and development focused activities. “The technology is there, and it’s moving, and it’s all over the world, not just in Europe,” he said.