Ireland needs to use regulation to “stimulate innovation” as well as take advantage of a number of key strengths in order to grow the financial services sector across the country, a new report from consultancy firm EY has said.

The report is based on interviews with 140 senior financial leaders across the country, as well as an analysis of the 10 fastest growing financial service markets globally. It highlights Ireland’s technology sector, strong regulatory and legal frameworks, and access and proximity to the EU single market as key competitive strengths going forward.

To further grow the financial services sector, the report suggests Ireland should use regulation to “stimulate innovation” by providing support for and participation in the Central Bank of Ireland’s Innovation Hub Sandbox programme and establishing a collaborative financial services AI and cyber working group.

The country should also invest in developing the skills in our workforce that can enable Ireland to move further up the financial services value chain.

In addition to these measures, EY said Ireland should leverage its position as a tech hub to establish cross-sector collaboration between firms, the Government, and academia, as well as leverage political and economic stability to “deepen Ireland’s position as a global significant location for financial services companies from the US, UK and beyond”.

EY said based on modelling it had done, changes in these areas could add €3.4bn in gross added value (GVA) to the financial services sector by 2028. GVA is the output generated by a sector minus the cost of goods and services used to create its product and services.

“Delivering this growth could raise employment across Irish financial services by as much as 34% over the period 2024-2028, an annual increase of around 6%,” said EY, which would see total employment grow by 30,000 to 168,000.

According to the report, 92% of the financial service leaders interviewed see technological infrastructure and innovation as Ireland’s most significant competitive advantage over international peers.

Ireland ranks seventh for technological infrastructure and innovation globally under the EY 5-Accelerant Framework, buoyed by the level of collaboration between universities and industry taking place within the market.

In addition, 58% of those interviewed said access to the EU single market was also a key advantage, with 48% highlighting its proximity to major European financial centres and its cross-border tax policies and frameworks.

When asked to highlight any areas of perceived disadvantage for Ireland in comparison to other leading financial services hubs, 32% cited the affordability and accessibility of housing in cities, while the cost of living and doing business was highlighted by 33% of respondents.

Financial services managing partner at EY Ireland Colin Ryan said the competition for international investment was “fierce” and to succeed Ireland had to “remain proactive to solidify Ireland’s competitive advantages in a rapidly evolving global economy”.

“We must reinforce the strengths that have historically set us apart, while also embracing new opportunities in areas such as sustainability, digital transformation and financial innovation,” he said.

“The opportunity before us is immense,” he added.