why Ireland is a good move
Increasing numbers of UK businesses – of all sizes and from all sectors – have chosen to relocate to Ireland since the Brexit result in 2016 and the numbers show no sign of slowing.
There was a buzz in Dublin legal circles recently with speculation that US employment law giant Littler planned to open an office in the Irish capital.
Reports emerged that GQ Littler, the UK arm of Littler, had already hired employment partner Niall Pelly from Matheson to head up the new Dublin office, although the firm – and Pelly –both remained tight-lipped about it.
Nevertheless, if GQ Littler does plan to set up an office in Dublin, the firm won’t be alone. It will join a host of high-profile UK and US law firms that have already set up bases in the city since June 2016. With the end of the Brexit transition period looming on December 31, law firms want to retain access to the EU legal system and take a slice of the anticipated increase in legal work in Ireland once the UK has finally exited the union.
But it isn’t just law firms that have flocked to Dublin: a report by EY found that 29 financial services companies have made the move since the UK voted to leave the EU. This makes Dublin the most popular relocation site for the sector, ahead of Luxembourg on 25 and Frankfurt on 24.
Banking, insurance and asset management firms have led the charge to establish a base in Dublin, including what EY call a “significant proportion” of globally systemically important banks.
This has come with significant investment from banks in Dublin. For instance, Barclays has pumped up to €2.6 billion of capital into Barclays Bank Ireland in preparation for Brexit during the past couple of years, demonstrating its commitment to the Irish market. In addition, Bank of America invested heavily in Brexit preparations, adding 300 new jobs between Dublin and Paris recently. Meanwhile, JP Morgan has relocated “several dozen” staff from London since June 2016.
In all, 7,000 jobs could be relocated from London to other cities in the EU, according to EY. More than 63% of universal banks, investment banks and brokerages reported having already moved business and staff to remain within the EU or were considering doing so.
Concern for all businesses
Elsewhere, businesses from all sectors are relocating from the UK to Ireland as they move to retain access to the lucrative EU market. A survey by the UK’s Institute of Directors found that one in three UK businesses plan to move their operations due to Brexit, including a raft of SMEs, as business leaders worry over the prospect of a no-deal Brexit.
Ireland is the first choice for many of them, given its proximity to the UK and that English is widely spoken. Indeed, Kinsale-based accountancy firm Fitzgerald & Partners has reported a large uptick in UK businesses setting up in Ireland recently, with enquiries being made daily by managers of SMEs. The firm is working hard with UK companies and their advisers to get them ready ahead of the Brexit deadline.
To that end, the firm has established a business innovation hub in Kinsale aimed at UK firms wanting to set up a base in the Cork area, with Kinsale an ideal option given its closeness to Cork Airport.
Favourable investment location
It helps that Ireland has been pushed as an investment location by successive Irish governments and there now are many reasons why businesses in any sector and any size should consider Ireland as a base. These include:
- A corporate tax rate of just 12.5%
- Reduced corporate tax rate for research and development/intangibles
- Well-developed infrastructure
- Competitive operating costs
- Excellent holding company regime
- Well-educated, young and flexible workforce.
From January 2021, Ireland’s membership of the EU and the benefits of that will also be a considerable pull for many businesses. These include:
- Access to the single market and customs union
- The only native English-speaking member of the EU
- Currency is the Euro, so no exchange fees or admin when trading with most other EU member countries.
The possibility of relocating is just one of the many aspects UK-based businesses have to consider regarding Brexit – although several studies in 2020 have found that up to 80% of companies are not ready for the effect that exiting the EU will have on their businesses.
There are reasons for this, not helped by the UK government’s continuing failure to provide clarity over what the trading relationship with the EU will be from January 2021. At the time of writing, with less than 40 days until the transition period ends, businesses don’t know if a trade deal will be in place. This makes planning with any sort of certainty incredibly difficult. As a result, some business owners have taken a ‘head in the sand’ approach, while others may believe trading will be largely unaffected.
But regardless Brexit is going to be a significant problem for UK businesses and anyone who deals with them, even if they don’t trade directly with others located in the European Economic Area. This is something that directors of UK companies must consider seriously.
Company directors have an obligation to make decisions that are in the best interests of the business in the long-term. This includes nurturing relationships with customers and supplies and acting in the interests of employees.
In terms of Brexit, this means keeping on top of what changes in regulations – and potential changes – are and how they will impact the business and what it will need to do to remain compliant if it trades with EU companies.
For instance, this can include:
- Assessing contracts with suppliers and customers for any likely breaches and what the consequences could be
- Checking the immigration or visa status of employees who may need to visit the EU
- How visa and immigration requirements could impact on the business – considering the Common Travel Area between Ireland and the UK
- Making sure the business has all the licences it needs to continue to be able to trade
- Working out the potential impact on the business’ cash flow of things like extra time needed to reclaim things like VAT paid to European customs authorities
- Whether an EU representative is needed under General Data Protection Regulation.
Directors also have an obligation to address any threats or opportunities presented by Brexit, including the incentives for setting up a subsidiary an EU member state such as Ireland, as well as the tax impact of moving operations.
A no-deal Brexit would have serious threats to businesses that trade across European borders – although it is still possible that a free trade deal will be agreed – with implications for customs, VAT and tariffs to consider. This could make moving a business from the UK to Ireland a more attractive option.
The Republic of Ireland’s unique position of being the only shared land border with the UK means that it is likely that special provisions will be made. For instance, UK authorities have previously announced plans to remain part of the Common Transit Convention once Brexit has been completed. This creates an advantage for Irish businesses because it allows exports to pass from Ireland through the UK to their final destination with reduced customs checks and controls.
In addition, Ireland will still be part of the EU Free Trade agreement so businesses will still be able to trade across European borders freely.
Types of companies
For UK businesses looking to set up a business in Ireland, there are four main options open to them. These are:
- Irish subsidiary company: in this case, at least 51% of the shares in the company are held by the existing UK business
- Irish branch company: this type of company does not issue shares and is treated as an extension of the UK-based parent
- Irish holding company: these act as a parent company, which holds the shares of several subsidiary companies
- Stand-alone Irish company: as the name suggests, this is a company registered in Ireland and the UK company’s assets are transferred into it, so it has no legal link to the UK.
Whichever option is chosen, the owners and directors of the UK business are going to require expert advice. While Ireland may share a land border with the UK, it doesn’t mean that its business practices are the same – indeed they can differ significantly – and this can trip up the unwary business owner. Taking local advice can make the difference between success and failure and make establishing a company – of whatever type – substantially smoother.