Sunday 18 March 2018

Richard Curran: No sign yet of Brexit dividend bringing a jobs bonanza for IFSC

Dublin’s IFSC has yet to see the expected influx of jobs from London City-based firms switching to Ireland in the wake of the Brexit vote
Dublin’s IFSC has yet to see the expected influx of jobs from London City-based firms switching to Ireland in the wake of the Brexit vote
Richard Curran

Richard Curran

A big shopping Christmas for Newry may be on the way as sterling fell to an eight-year low against the euro during the week. As it clawed back some of its losses, when the euro broke through 92p, the British currency appeared to be perching on a new ledge before its next fall.

The last time it was at these levels, there were queues of cars on the Belfast road stocking up on chocolate, Prosecco and toilet roll!

What may be good for bargain hunters heading North, or online shoppers browsing UK retail websites, is surely bad for most other aspects of the Irish economy. Sterling is likely to keep falling, further hitting Irish exports and making the country more expensive for British holidaymakers to visit.

So whither the so-called Brexit dividend which is supposed to provide a counterweight to all of the job depletion and economic costs that Brexit is likely to bring?

The expected exodus of financial services jobs from London is happening, but so far there are precious few facts available about how many are coming to Ireland.

There are lots of announcements but not a lot of specifics.

During the week a senior official at the German Bundesbank, Andreas Dombret, said that Frankfurt and Dublin were proving to be the big winners in the jobs hunt. But announcements made so far regarding new investments in Dublin have been a little opaque.

JP Morgan is taking up new offices which could cater for 1,000 more staff. Great! Is that the same as saying it plans to hire 1,000 additional people in Dublin? Not quite.

Bank of America was flagged as choosing Dublin for its EU hub after Brexit, which rightly generated some positive headlines. But no jobs figure accompanied the announcement. The language used by the company suggested it would see Dublin as the place to consolidate its "legal entities". This isn't exactly the same as saying it will locate its European trading hub in Dublin. That is because it has said the trading hub will go to Paris or Frankfurt.

'Barclays picks Dublin for its European hub' was a Daily Telegraph headline last month. That sounds huge. The bank currently employs around 120 staff in Dublin but declined to say how many new jobs it might create in Dublin. In fact Barclays chief executive said in May that he saw no reason to shift jobs to Europe as a result of Brexit.

The Telegraph speculated the Dublin initiative could create around 100 to 150 new jobs. Pretty good but not a bonanza.

IDA Ireland has said that deals have been struck with more than a dozen companies to move some of their operations to Dublin. That is very positive but where's the beef? It is early days yet and many banks are exploring options and putting together plans without committing irrevocably or too heavily.

In January 2017, seven months after the referendum result, there were 21 banks licensed by the Irish Central Bank to operate here. In August the figure is 20. In January there were 33 credit institutions from the EU or EEA area licensed to operate in Ireland or on a cross-border basis. In August the figure remains at 33.

Of course you don't need a new licence to ramp up jobs in Ireland, if you have a licence already. But there is very little meat in the Brexit dividend sandwich yet.

The PR must be working abroad when the Bundesbank's head of banking supervision suggested we are doing very well. He may know something we don't know yet. Or he may be simply buying into a bit of hype.

CRH should re-assess plans in 'toxic' Philippines market

CRH has done a nice bit of business by selling its Americas distribution business for €2.2bn while acquiring a new German company for €600m. It sold on the US business 12 times earnings and bought the German business for six times earnings. Well done indeed.

Perhaps CRH chief executive Albert Manifold should consider doing something clever with its joint venture in the Philippines, where he said this week the market was "challenging". That is one way of putting it.

Philippines president Rodrigo Duterte is famous for engaging in a massive war on drugs.

This has seen around 12,500 people killed in the last year, most by masked assassins, believed to be undercover police officers, and 3,500 killed in formal police operations.

There were mass protests last week when a 17-year-old boy was killed by police after CCTV footage showed him being dragged through alleyways and allegedly told to run with a gun, before being shot.

He was heard to say "please can I go home, I have school tomorrow".

Aside from the drugs war, Duterte has promised to deliver a "golden age of infrastructure" backed by a plan to spend $160bn on infrastructure over a six-year period.

This is great news for cement-makers like CRH which has a joint venture with Philippine investment group AEV and is the biggest cement maker in the country by capacity.

Yet, the performance of major cement makers there has suffered.

Rather than invest in new capacity, the market is being flooded with cheap imports. CRH's venture has committed to spending €300m in the next five years expanding capacity at its existing five plants in the country.

But enter billionaire friend of Duterte, Ramon Ang. His Eagle Cement floated on the stock market in May. Investors couldn't get enough of it and were dumping rivals shares ahead of the IPO.

His sales are up and he is investing big time in the country. Described by Duterte as a "fast friend", he allegedly offered to buy the president a private jet for his own safety, but Duterte declined the offer.

Since then a state competition probe has been stepped up which alleges anti-competitive cartel practices by the main providers in the market through the Cement Manufacturers Association of the Philippines, including CRH's operation, called Republic Cement. Ang's Eagle Cement is not a member.

Ang's influence in the economy is growing. One national newspaper, The Philippine Daily Inquirer, has held successive presidents to task and has been critical of Duterte.

Its owners have been accused of tax evasion, and according to The New York Times, have been bullied into selling the paper.

The buyer is none other than Ramon Ang, who is currently doing due diligence on the business.

At a time when major cement companies should be doing very well, Cemex Holdings Philippines reported a 46pc drop decline in net income in the second quarter. CRH's JV partner, AEV, reported a 43pc year-on-year drop in the income contribution from Republic Cement and Building Materials.

Ang's Eagle Cement is thriving.

Manifold has defended the plan to invest heavily in its Philippines plants, suggesting that in the longer term domestically produced cement will be a better bet and customers are brand aware.

The Philippines looks like a, shall we say, "complicated" place to do business right now. Duterte is becoming more toxic and CRH will have no guarantees it will even get the full benefit of any infrastructure spend that may be coming from Duterte's government.

Climate change claims a washout

Flash floods in Donegal will place the thorny issue of home insurance back on the agenda for many people further south in flood-prone areas. November is coming.

The Donegal rain storm flooded houses that had never been flooded before. Described by meteorological expert Gerry Murphy as a "once in a century event", how will insurers treat houses hit by floods in Donegal when they try to renew their policies?

Companies have been known to refuse home insurance on properties in flood prone areas which have been flooded.

How will they view a once-in-a-hundred-years event?

Will they refute that risk on the basis that it is likely to occur again because of climate change or is it a very good risk because it won't happen again for a hundred years?

I bet it will be the former.

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