The UK’s Brexit vote in 2016 was a momentous event, with many observers in the financial sector assuming that the country’s loss of EU membership would be Ireland’s gain. Due to its proximity, there was some anxiety about the economic dislocation that Brexit could cause, but there was also an expectation that Ireland could enjoy new opportunities around investment, trade and domiciliation.
“The [Irish] real estate sector did feel optimistic about a post-Brexit bounce, due to the advantage of being the only English-speaking country in the EU,” says Tony Grant, director of Ireland at international independent real estate consultancy Hollis. “Unfortunately, it never really happened, as covid struck just as we’d have expected activity to start.”
While Ireland may not have enjoyed the level of activity it was expecting as a domicile, as the regulatory landscape settles – on both sides of the Irish Sea – a post-Brexit rush may have simply been delayed.
Previously seen as damaging Ireland’s potential as a post-Brexit domicile, the country’s regulatory landscape around investment limited partnerships needed modernization. This finally took place in late 2020, when Ireland’s Investment Limited Partnership (ILP) legislation was amended.
“[Ireland] is the choice location for many US and UK managers due to cultural ties, no language barriers and ease of access”
“The ILP is intended to combine the best features of LP structures in other jurisdictions, and enhance them – allowing Ireland to take advantage of the increasing demand for private market assets,” Joanne McEnteggart, managing director for Ireland and head of corporate services for the UK and Ireland at IQ-EQ, explains. “The ILP’s benefits are numerous.”
These benefits include that the ILP does not mandate for GPs to be regulated, provides the facility to migrate existing funds into Ireland as an ILP, has no direct taxation, and offers 24-hour fast-track approval from the Central Bank of Ireland. The new financial structures offered by the revamped ILP are likely to drive a reassessment of Ireland’s appeal as an investment domicile.
Fulfilling its potential
With the dust settling on the new ILP regulations, Ireland is already starting to witness the benefits. In 2021, Ireland-domiciled assets grew 22 percent, according to the Irish Funds Industry Association, and despite a slight decline this year, remain above their pre-2020 level.
“Movement is already starting to happen and we are seeing a trend of being asked to do the transactional due diligence on assets that we had completed the surveying for when they sold five years ago,” Grant notes.
As a result of Brexit and the amended ILP Act, Ireland has become a leading fund domicile – the second-biggest in Europe and the third-largest in the world, by Irish Funds’ reckoning. “It is the choice location for many US and UK managers due to cultural ties, no language barriers, and ease of access,” McEnteggart adds. “Ireland has a highly educated professional community of service providers, lawyers and tax providers, and has developed a strong financial services community for the last 40 years.”
Many of the factors that make Ireland attractive as an investment domicile have deep roots that long pre-date the Brexit vote. The new ILP Act may simply be the trigger point that supercharges the potential of Ireland-domiciled assets.