Tuesday 20 February 2018

Home truths: No rooms at the Brexit inn

Philip Lane, Governor of the Central Bank
Philip Lane, Governor of the Central Bank
Mark Keenan

Mark Keenan

The double- edged sword that is Brexit has the potential both to kill existing Irish jobs in numbers, but also to bring in plenty of new ones.

On the negative side, numerous organisations have already warned how the fallout from the Brexit referendum in the UK is hitting employment prospects. This week, a survey of members of Engineers Ireland working in Ireland or Britain reveals that 40pc have had commercial deals deferred or adversely adjusted as a result of the referendum result.

A third of those members surveyed said they had already felt the "Brexit bite", with two thirds in Britain stating they'd be less likely to do business with the Republic as a result. Irish food businesses like the mushroom sector (which exports heavily to the UK) have also been hit hard, with the fall in sterling causing firms to close. It was recently estimated that up to 400 jobs are in the firing line at mushroom sites nationwide, with a number of prominent firms recently closing down.

The Food and Drink Industry Ireland group warned in September that 7,500 jobs were at risk if sterling weakened to the £0.90/euro mark. This week, sterling is hitting that floor.

So Irish jobs will go and this, in turn, will have a knock-on effect on the rental sector as those who cannot get new jobs, or are forced to take lower-paid positions, fall back on rental accommodation. A certain number of homes will be repossessed or sold on those who find difficulties getting new jobs renege on mortgage payments.

But there's also good news from Brexit, in particular from banking. London might not be the European capital of banking for much longer. Central Bank Governor Philip Lane recently stated in an interview with Bloomberg that banks have already begun exploring the possibility of moving activities from the UK to Dublin given that Brexit may neuter or damage London's right to sell financial services across Europe.

"There has to be some level of relocation depending on how the Brexit negotiations go," Mr Lane said in an interview with Bloomberg. As the last remaining English speaking EU member country, Ireland is seen as one of the favoured destinations for British-based financial firms that want to retain so-called 'passporting' rights, which allow them to do business within the EU.

The sentiment is being reflected in the Global Financial Centres Index, which ranks the world's financial centres on a range of measures. Recently, Dublin's strength rating has begun to climb.

A survey published this week also shows a hike in queries from the UK to estate agents here regarding business space.

The Q3 Ireland Commercial Property Monitor published by the Royal Institute of Chartered Surveyors says 29% of respondents report such enquiries.

British based firms relocating to Ireland, are likely to seek city locations and will want to to bring in large numbers of their own personnel. Again, this will put further pressure on a city rental sector which is already stressed almost to breaking point. So Brexit bites Irish jobs and lays more pressure on the private rental sector and Brexit is also likely to stress rentals further by bringing in execs in numbers.

Before we get enthusiastic about hundreds of British bankers landing in Dublin, we should ask ourselves where exactly are they going to live? Until recently, it was the rising cost of rental accommodation that most concerned foreign firms relocating here. Today, it's a matter of little being available at all - at any price.

A search on Daft.ie in the "any residential property" category for Central Dublin (all the single digit postcodes) shows just 27 rentals available for units letting at €1,200 per month or under. It gets worse when we restrict our Dublin City centre search to flats or self-contained accommodation only. The same search seeking units for €1,200 or under revealed just seven options. Seven - in a city of 1.35m people.

And while we might argue reasonably that London bankers and those based in other capital cities are used to paying out high rents, we should add that they are also used to getting quality for it. A perusal of what's available in Dublin at a bearable outlay for a middling banker salary, shows a miserable line-up of poky shoe boxes in equally miserable condition. In middling neighbourhoods, we see box rooms measuring six feet by eight feet seeking €550 per month as part of house share arrangements. This isn't kosher for incoming Brit bankers used to swank.

This week, in an update of his Rebuilding Ireland housing plan, Minister Simon Coveney listed an affordable rental scheme among the measures which are behind in implementation. In his recent interview, Central Bank governor Philip Lane said: "Institutions aren't in decision-making mode yet, they are essentially doing research." What they find out will make their hair stand on end.

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