Can Belfast Become the Next Financial Services Hub?

The Financial Services Industry in Northern Ireland – Can Belfast Become the Next Financial Services Hub?

Author

Conor Magee

Analyst II

Published

Monday 23 July 2018

Resourcing

Northern Ireland has had a chequered past, that has left a legacy. Events such as the troubles and the financial crisis slowed down economic progress, net migration loss increased, and it seemed as if globalisation had overlooked the City of Belfast and Northern Ireland.

Fortunately, there is a more positive outlook now. Over the past decade, Belfast has been flourishing. There has been significant growth in employment, with around 32,000 individuals working for the financial and related professional services in NI, contributing to around £1.9bn to the economy. (1) “Employment in the banking and financial services sector is growing and it forms a very significant element of Northern Ireland’s economy” (2), investors have now awoken to the unique prospect Northern Ireland offers. “Belfast has managed to attract a number of financial services businesses in the last few years. That includes FinTrU and global giant Citigroup.”(3) Tourism has multiplied, making Northern Ireland one the most visited places in Europe with figures estimating that NI welcomed 4.9 million visitors during the period Jan- Dec 2017. (4)

The Government has made multiple investments into the economy, both in the financial sector and in the tourism industry. Invest NI is the regional development agency, and their role is to grow the local economy. They achieve this by helping new and existing businesses to compete internationally, and by attracting new investment to Northern Ireland.(5) Invest NI have provided financial support to FinTrU to help the financial services company to create 605 jobs over the next 5 years, with over half of these roles located in Derry. Initiatives such as this are why the unemployment rate in Northern Ireland remains close to a record low, “in the period March-May 2018 the rate was 3.5%, the joint fourth lowest on record.” (6)

WHY INVEST IN NORTHERN IRELAND?

Northern Ireland is famous for its natural beauty and picturesque landscapes. It is also home to two of Europe’s leading universities; Queens University, Belfast and University of Ulster, Jordanstown, both globally recognised research centres across a range of disciplines, with highly educated students, creating a pool of world class talent. These graduates are knowledgeable and engaged upon finishing university. “Around 5,500 individuals graduate annually with a degree in a relevant discipline, including finance, accounting, business, maths, law and computing”. (7)This has led to a highly educated workforce with strong quantitative skills. (8)

Belfast has two major airports, both near the city centre. With flights to and from London and other major parts of Europe daily. It is near shore, has 4 ports and is in the same time zone, regulatory environment and with a parallel culture to the rest of the UK. The city has highly efficient railway service, along with first-rate road network which has minimal levels of congestion compared to other major cities in Europe.

Belfast has sophisticated infrastructure around the city, it contains state of the art telecommunications and high speed broadband across the Greater Belfast Area. “It became the first region in Europe to achieve 100 per cent broadband coverage and one of the first to operate and experience high speed, next generation services with a 100-gigabyte per second transatlantic and terrestrial telecommunications link between Northern Ireland, North America and Europe”.(9) This allows investors to truly have leading edge telecoms infrastructure.

Belfast is one of the most cost effective locations, with cost analysis showing that operating costs are on average 20%-30% lower than the rest of the UK and Europe. (10) With lower average wages than mainland UK, Northern Ireland remains an attractive option for foreign investment. Cost to do business is much cheaper, which will be even more evident with the success of the plan of reducing corporation tax to the new rate of 12.5%. This is in the hope of attracting even more outside investment to the region. “Research outlining the future strategy for the UK's financial services say Belfast could see the sector expand by around 25% here, making it the second fastest in the UK.” (3)

The financial services sector employs more than two million people across the UK, with around two thirds based outside of London. (11) The financial services industry in Belfast is prosperous; Belfast has become the major destination for fintech development projects in the UK. Historically financial services in Belfast has centred around retail banking roles, but in more recent years the sector has continued to grow with the introduction of investment banking roles and associated functions.

Local government is committed to growing the global business sector, providing financial assistance, pro-business environment for the better good and entrepreneurial, and regulation is kept to a minimum to allow the industry to thrive. Invest NI works in partnership with investors and offers support, including grants and advice for business growth and development.

IMPACT OF BREXIT, AND POTENTIAL CONSEQUENCES

Although there are still clear aspects of uncertainty around the terms under which the UK plans to leave the European Union, a broad plan to start the process is being implemented. Post Brexit, Belfast will enjoy an exceptional position as part of the UK but is still geographically next door to Ireland and the EU. There will be an opportunity to prosper due to this unique situation, as London will still be so accessible. Free movement of people/workers across the border will be imperative for the continued success and growth in the region.

“If the UK is to become ‘the biggest global advocate’ of free trade, Northern Ireland could have unprecedented access to some of the fastest growing markets around the globe”. (12) The likelihood, although contentious, of a soft border may allow an advantage over other local competitors such as Scotland. It is believed that there is a risk that Scottish business will suffer a competitive disadvantage to its neighbours in Northern Ireland, there may be a preferential relationship with the single market. (13)

Brexit will bring with it transformational change across the UK, the economic future of the country will be dependent upon local business and their ability to trade globally and take advantage of free trade deals. (12)

BUILDING ON THIS PLATFORM

Belfast must start to/continue to compete effectively with the rest of the world. “Regional financial hubs such as Belfast ‘help boost UK as global leader in the sector’”. (14) Businesses must take advantage of their position, and be innovative in their approach, "London will remain a premier location, but the emerging jewels in the crown by 2025 will be regional financial centres outside London”. (3) The industry must continue to be world-class, highly innovative and better able to meet the changing needs of customers. (11) The government must spend money on efficiency, and effectively continue investing in projects that have been successful and find more ways to continue this growth. This transformation will continue to attract business to Belfast, as well as helping those who have grown here to prosper. This will require government and regulators to create a strategic partnership, and not be dependent on the industry to do this alone.

Belfast must start to branch out further, as the city will inevitably run out of office space due to this increase in demand. There may be an opportunity to recreate the same vibrant and ambitious financial sector elsewhere in Northern Ireland, in areas already growing such as in the North West. FinTrU have announced that they will establish a new operation in Derry, creating 305 new jobs for the region. The investment will capitalise on the abundance of local talent and add to the already flourishing Financial Services sector in Northern Ireland.

Northern Ireland, and in particular Belfast “is an emerging rather than a developed market- opportunity lies in its potential”. (15)

References:

Conor joined FinTrU in October 2016 and was part of our fourth Financial Services Academy. Conor graduated from Queen’s University with BSc in Accounting and went on to complete a MA in Accounting in DKIT. The academy gave Conor a great introduction to the financial services industry through extensive training comprising of training in financial markets, financial regulation, and investment administration with a focus on data analysis and management.

Conor has been working as part of the Client Outreach Team for a Tier 1 investment Bank, and has worked on various regulations and directives including MiFID II. This role includes ensuring that the regulatory requirement related to MiFID II inducement provisions are understood by all impacted stakeholders. Also, working with technical teams, support teams to facilitate definitions of new operating model and documentation of process changes as a result of the new reporting requirements.

While at FinTrU, Conor has completed the 3 modules of the CISI Investment Operations Certificate, a professionally accredited qualification sponsored by FinTrU. This involved studying an Introduction to Securities and Investments, UK Financial Regulation, and Derivative Operations.

Conor Magee

Analyst II