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Michael Stapleton, VP Financial Services at the Investment Development Agency (IDA Ireland)

Recession could be blessing in disguise

Interview with Michael Stapleton – Ireland’s economic woes are well documented. Spiralling real estate prices and failing banks have created domestic economic contraction over the last three years, but the European Commission forecasts 3% growth in 2011.

Factor in that Ireland was the second largest net recipient of non-EU foreign direct investment (UK being number one), attracting EUR21billion, and Michael Stapleton, VP Financial Services at the Investment Development Agency, (IDA Ireland) has cause for optimism.

"None of Ireland's indigenous problems directly impact on the bigger drivers of the Irish economy, which are multinational companies such as Microsoft, State Street, Citibank," explains Stapleton. Ireland, as a marketplace, prides itself on innovation and being "pro-business", as reflected in its attractive 12.5% tax structure. When its economy ballooned a few years ago, however, there was a real risk that rising costs could actually dissuade financial services firms from setting up there.

"What the recession has done for Ireland's operating environment is to shock the cost base into something approaching common sense," says Stapleton, noting that property prices have fallen 50%.

Keeping costs under control is vital for companies, particularly those operating in the hedge fund administration space. Profit margins are healthy but administrators rely on a large, skilled workforce. Uncontrolled wage level increases would negatively impact bottom line performance.

"The broader fund administration business grew by 900 people last year and is expected to grow by the same amount this year," confirms Stapleton, with PwC expected to hire 400 graduates across its business divisions.

International law firms are returning to Dublin, in particular Maples & Calder, Dechert and Walkers. The latter two only established a presence there last year and have 30 to 40 people but Maples, who've been there for three years, employ 150 people . "We see new law firms like Walkers coming in as a good thing.
If someone is a trusted advisor to a hedge fund and establishes a base in Dublin, Dublin has a better chance of winning the business," says Stapleton.

Promotion and traditional marketing, not to mention forging strong relationships with companies, play an important role in the IDA attracting companies to Ireland. "Brokering information is a large part of what we do in collaboration with the Irish Funds Industry Association (IFIA). When a company conducts due diligence, IDA is very supportive in helping them decide whether Ireland is the right place for them," explains Stapleton.

"I wouldn't rule out asset managers, quants and other folk moving here along with their funds but for us the easiest business area in which we can convince someone to operate is on the technology side. Ireland is strong in IT. Back-office support can represent up to half a company's total investment so for us that's the lowest hanging fruit," says Stapleton.

That Ireland's management pool has deepened considerably since the onset of the Celtic Tiger has changed the way multinationals operate. Previously, they used expats but as Stapleton explains: "Now they're using local talent, and nowhere is that more true than in financial services. They're cosmopolitan folk who've worked for major corporations across the world and are now back home."

Global healthcare firm Alere, not to mention Deutsche Bank, Butterfield, Fulcrum and Fidelity Investments have invested substantially in Ireland this year according to Stapleton. By doing so they're generating a persuasive force for others to follow suit.

Please click here to download a copy of the Hedgeweek Special Report: Ireland Hedge Fund Services 2011

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