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AUGUST

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2017 ECONOMIC OUTLOOK Dr. Constantin Gurdgiev

HANDHELD BANKING: WHAT DOES THE FUTURE HOLD? HONE YOUR SKILLS AS AN INSPIRING LEADER BUSINESS BRIEFS MEET THE TEAM


TABLE OF CONTENTS Economic Outlook - Dr Constantin Gurdgiev The Effects of Inflation on Holy Communion Gifts 5 apps to make your work life easer Handheld Banking: What Does The Future Hold? Business Briefs Hone Your Skills As An Inspiring Leader Tips To Prevent Mobile Charges Roaming Out Of Control Legal Briefs Meet The Team Range of Services

WELCOME

to the August 2017 edition of our newsletter. We hope you are having an enjoyable summer and have managed to get a break away and enjoy some much needed relaxation. This issue, as always contains articles on a variety of different topics which we hope will be of interest to you and your business. Our highly experienced team here at Gordon Lane & Co are happy to assist you, so please do not hesitate to get in touch with any queries you may have.

Denis Lane & Gary Buchan.

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Dr. Constantin Gurdgiev Recently, the World Economic Forum (WEF) published some snapshots of global surveys indicating that the Millennials are the first generation over the last century that are turning increasingly negative in its attitudes and perception of democracy. According to the WEF, “Not long ago, liberal democracy was regarded by many as not just the best form of government, but the inevitable form of government...In 2017, that view looks naive. New research warns that democracy’s fan base is shrinking, especially among younger people.” And the problem is not limited to the countries with traditionally troubled attitudes to democracy, but holds for the likes of the UK, New Zealand, the U.S., the Netherlands, Australia and Sweden. To the majority of the political scientists, the decline in democracy’s fortunes is down to a vaguely defined rise in volatility of electoral and geopolitical outcomes. The second prevailing theory of de-democratisation is the alleged decline of societal consolidation. According to this theory, democratic values and institutions require concentration of voters into a small number of dominant ideological systems. Such centralisation secures continuity of strong trust in democratic institutions, social cohesion around the prevalent norms and direct consent by the voters.

Across the globe, the young are less invested in democracy. Source: Foa and Mounk, The Journal of Democracy, January 2017. www.journalofdemocracy.org

The problem with both of these world views is that they confuse the effects for the causes and ignore, or fail to explain, the elephant in the room: rapidly growing uncertainty (as opposed to volatility) of the socio-economic environments in the Western democracies since the end of the first decade of the 21st century. This latter hypothesis offers a stronger connection between economics and the investment markets, and the evolution of political risks.

‘‘Essential’’ to Live in a Democracy

80%

60%

40%

20%

Decade of Birth

While this phenomenon is a matter of fact, the potential causes for it are a subject of conjectures and debates.

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The Generation X, or X-ers, traces back to mid-1960s and runs through the late 1970s. X-ers enjoy lesser gains in political and socio-economic well-being than the ‘Boomers’, and, post-crises, the X-ers are feeling the economic and social pains. But, they are yet to surrender their belief in social mobility and the pain they feel is cushioned by past gains.

The Millennials generation, born after 1980, are witnessing a massive collapse of jobs security, poor career prospects, and decline in real risk-adjusted lifecycle incomes. By comparing their own fortunes to those of their predecessors, and by reflecting on the policies responses to the crises, they are increasingly convinced that democracy is the rule by the majority (the ‘Boomers’ and the X-ers) over the minority (their own cohorts).

UNCERTAINTY, NOT VOLATILITY

The idea of volatility in the political environment as a driver for declining fortunes of democratic institutions misdiagnoses the problem for two primary reasons.

The deep uncertainty about their possible futures defines the anxieties of the Millennials about the capacity of the democratic system to deliver economic and social progression, while the deficit of political representation of their generation defines their frustration with democracy.

The political landscape we are facing today is consistent with a Knightian (or deep) uncertainty, rather than with statisticallydefinable and simple volatility. The former is much worse for both analysis and public decision-making/opinion formation than the latter because deep uncertainty does not yield to traditional statistical or actuarial modelling. The extreme tail-events nature of Knightian uncertainty means that past outcomes of electoral choices and legislative decisions are a poor guide to the future preferences and incentives faced by the voters. Hence, the recent experiences of abject failures of the normally accurate probabilistic models to predict outcomes of elections in the U.S., the UK, Austria and the Netherlands, as well as referenda outruns in Switzerland, the Netherlands and the UK.

THE GRAND CANYON OF SOCIO-ECONOMIC DIVISIONS

From investors perspective, this means that normal risk adjustments to financial returns (e.g. value-at-risk framework and traditional factor-based models) no longer hold. Sharpe ratios, leverage ratios, all other mainstream financial risk metrics, as well as risk instruments, like VIX, carry little information about the deep uncertainty underlying the dynamics of financial markets. Investment is increasingly shifting to being a form of art, involving sensing of risks and threats, and carefully-structured thematic advice, than a mechanical factor-based pricing exercise. The added irony here, of course, is the spectacular rise in popularity of roboadvice and passive management vehicles in recent months, both of which are completely unsuitable for risk management in the face of systemic uncertainty.

Three factors combine to shape the Knighting uncertainty felt by the Millennials: demographics, growth dynamics and technological change. Demographic changes afoot today imply that a gradual reshaping of political leadership, ideologies and institutions that secured democracies in the past is restricted by the extreme polarisation of political participation. During the 1990s and 2000s, the West did not foster political elites’ transition from the Boomers to the X-ers, preferring to stress continuity and preservation of the past over deeper reforms. This made it impossible for the Western institutions to transition from the politics of the Boomers to the politics of the Millennials. In the U.S., the price of continuing with the Bush-Clinton status quo of the 1990s into the 2010s is the electorate that embraces the polar opposites, the TrumpSanders juxtaposition. In Europe, the fallout from decades of political surrender to technocracy created a twin peaks of extreme left and extreme right populism that are now firmly in control of the opposition.

Secondly, the evidence on de-democratisation suggests existence of different inter-generational perspectives on the ability of democratic institutions to represent diverse and increasingly divergent objectives of various demographic groups. In simplified terms, we are witnessing the polarisation of the electorate on the basis of demographic distribution of power across three broadly-defined generations: •

The ‘baby boomers’ generation are empowered by the status quo political and government institutions and parties (social, ideological and research organisations, lobbyists and social partnerships). This generation enjoys economic returns consistent with their access to power, as reflected in higher wages, the history of past career progression, better jobs security, greater wealth, and so on. The Boomers are political and socio-economic winners.

The end game here is that with less and less room for evolutionary change to catch up with run-away demographic divergence across the electorate, the likelihood of a political system implosion is rising. Geopolitical uncertainty is already a key factor in pricing a range of assets, from cryptocurrencies to commodities, to gold and all the way to benchmark government bonds.

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Although official unemployment is low, for every officially unemployed person in the U.S., there are three more ablebodied adults who neither seek work, nor work. Over the 1985-1999 period, total paid hours of work rose, cumulatively, by 35 percent. Accounting for the changes in population size, the 2000-2015 period saw a decline of paid hours of work per adult civilian of some 12 percent. In their December 2016 report, the “Equal Opportunity Project” team led by the Stanford University economist, Raj Chetty, estimated that the odds of a today’s 30-year-old’s earning more than her/his parents at the same age was 51 percent, down from 86 percent in the 1970s.

A significant spike in such uncertainty can trigger a severe correction in the investment markets. Hedging such losses is virtually impossible without a long-term preparation, yet investors and investment managers are largely unprepared to face this predicament. In addition to demographic divergence, economic transformation in the post-crisis era is exerting unbearable pressures on the Western value systems. The job-for-life concept and the decadesold education-to-social-mobility-ladder paradigm are gone. The Middle class-defining notion of expecting improvements in the quality of life and real incomes in every successive generation holds no more. Transmission of wealth across generations through inheritance is severely constrained by the fact that pensions gaps for the X-ers are likely to consume all the wealth inheritable from the Boomers. The twin secular stagnation thesis - covered previously in this article - completes the landscape of the Knightian uncertainty.

PIVOTING TO SAFETY

For many decades, since the end of World War 2, Western societies relied on one sole engine for economic growth: debt-financed investment, primarily in physical, human and technological capital. This model no longer works. Currently, long term, real returns on public and private investment linger at around 2-3 percent per annum, well below double digits returns enjoyed in the 1950s and 1960s, 6-7 percent returns over the 1980s and the 1990s. Risk-adjusted human capital investments (education and training, entrepreneurship etc) are yielding returns that are barely above the cost of funding.

As I noted above, hedging this uncertainty is much harder than hedging technical risks. And devoting significant resources to structure a portfolio geared to meet the shocks from this deep uncertainty runs counter to the traditional investors’ pursuit of nominal returns. Traditional simple long-only portfolios diversification combining fixed proportions of mainstream asset classes, such as property, equities and bonds, are not tilted to protect against extreme tail risks that materialise and evolve rapidly in the aftermath of the blowouts in political and systemic uncertainty.

There is no credible alternative to the borrow-to-invest economic growth model. The tech revolution, while a powerful driver for value creation, is so far failing to trigger productivity growth, comparable to that of the 1990s. Meanwhile, robotisation and automation are directly and tangibly threaten the future prosperity of the middle class. Since 2000, household and non-profit financial institutions wealth in the U.S. rose from $44 trillion to $96 trillion and is now more than $20 trillion higher than at the pre-2008 peak. But the actual economy did nothing of the sort. Over 19482000, average rate of per capita GDP growth in the U.S. was close to 2.3 percent per annum. From 2000 through 2016, per capital growth was averaging below 1 percent per annum.

On the equities and bonds side, some protection against systemic tail risks and deep uncertainty can be found in ESG (Environmental, Social and Governance) risk-rated funds and by tilting the portfolio of individual instruments toward ESGrated corporates. However, in the end, even these strategies deliver just a partial cover for Knightian uncertainty. Only cash and directly-held precious metals can offer a sufficient buffer against systemic markets corrections, at a price of foregoing significant returns on these assets in the periods outside uncertainty materialisation.

As a young generation, the Millennials are poor in the capital domain and rely more heavily on labour income. This is problematic. Over the 2000-2016 period, the work rate for Americans age 20 and older fell from 64.6 percent in the 1990s to 59.7 percent.

Dr Constantin Gurdgiev is the Adjunct Assistant Professor of Finance with Trinity College, Dublin and serves as a co-founder and a Director of the Irish Mortgage Holders Organisation Ltd and the Chairman of Ireland Russia Business Association. He holds a non-executive appointment on the Investment Committee of Heniz Global Asset Management, LLC (US). In the past, Dr Constantin Gurdgiev served as the Head of Research with St Columbanus AG (Switzerland), the Head of Macroeconomics with the Institute for Business Value, IBM, Director of Research with NCB Stockbrokers Ltd and Group Editor and Director of Business and Finance Publications. He also held a non-executive appointment on the Investment Committee of GoldCore Ltd (Ireland) and Sierra Nevada College (US). Born in Moscow, Russian, Dr. Gurdgiev was educated in the University of California, Los Angeles, University of Chicago, John Hopkins University and Trinity College, Dublin.

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APPS 5

Scanner Pro This is the best app to use for quickly scanning and saving, digitally, paper documents.

to Make Your Work Life Easier

The documents can range from a small one page receipt to bigger multi-page documents. The app also detects borders as well as adjusting the geometry or any distortions in text. Essentially your phone or device is a portable scanner and documents can be emailed, exported or uploaded to document storage websites (such as Dropbox or Google Drive).

Expensify Do you dread having to file expenses? Then Expensify may be the app for you. It has over 4 million users around the world and is the top rated tool for expenses report management, receipt tracking and business travel. Just take a photo using Smartscan of your receipt when you make a purchase and upload to the app - then let the app do the rest! It will organise receipts and produce your expense records for you without you having to go through the cumbersome task of organising and logging receipts yourself on a spreadsheet. The app was designed with accountants and small business owners in mind.

Hotel Tonight Ideal for business and non-business travel. This app makes it extremely easy to find a great hotel deal. With over 15,000 hotels signed up in over 35 countries worldwide, it only takes 3 taps and 1 swipe to get the best deals at the last minute.

Docu Sign This app is the industry leader in electronic signatures. It allows you to add your signature to PDF email attachments and also makes it easier for you to send your documents to be signed. It also provides real time updates, telling you when your signed document is ready or reminding you that you need to sign documents.

Liquid Text This app enables you to import a document or a web page and then click text pieces or paragraphs to a clipboard by highlighting and dragging the relevant text to a screen to the side of the original screen. You can add snippets and merge them as you go along. You can then share or export the snippets to email or online storage accounts.

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THE EFFECTS OF INFLATION ON HOLY COMMUNION GIFTS A recent survey by Ulster Bank found that in 2017, there has been a 4% increase in the gifts Irish children received for their First Holy Communion compared to the same period last year. While the amount parents spent on the event - €845 - was roughly the same in both 2016 and 2017, the amount of monetary gifts received by children increased. In 2016 the average amount was €546, however this year 23% received €800 and 13% received in excess of €1,000. Figures show boys received more than girls with an average of €591 and €550 respectively. Overall spending in preparation for the First Holy Communion day rose by just 1%, following on from a 12% increase between 2015 and 2016. There was a 48% decrease on children’s entertainment spending, with people spending on average €78 and €41 on hair and makeup. The food, beverages and celebrations at a First Holy communion event cost an average of €388, increasing by 5% from last year. Approximately €185 was spent on the child’s clothing for the day, and €153 on that of the other family members. 92% of parents used their savings to pay for the day, which accounts for a 5% increase on the 2016 figures. The report concluded that a First Holy Communion is the perfect opportunity to teach a child about savings and finance. On that note, 85% of parents said they would put some portion of the monetary gifts in a savings account for their children. 18% of parents allowed their children to spend the money they received. The amount of money spent on toys increased by 2% to 42%, and 31% of children bought clothes. Others bought sports equipment (16%), computer games (15% - down from 19%), and books (14% - down 2%).

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THE CHANGING WORLD OF BANKING:

What does the future hold? A Permanent TSB spokesperson also said that the bank noticed that mobile usage has outgrown desktop electronic banking. The number of customers using the bank’s mobile app for day-to-day transactions continues to grow.

As we make the switch from online banking to mobile apps, how will the banking landscape respond?

This trend places considerable pressure on banks to remain competitive and current in the field of digital banking in order to appeal to the modern consumer as other digital financial services continue to shake up the market.

Few people can remember the last time they went to a physical branch of their bank. However, most of us handle our day-today banking on the go, using a mobile phone app.

N26 is one such ‘digital-only’ challenge. The company was awarded a European banking licence in 2016 and has already secured 10, 000 current account holders in Ireland alone. Head of International markets at the Berlin-based fintech company, Alex Weber, says that Ireland is one of their fastest growing international markets. He believes that the success of N26 in Ireland is driven by the fact that the Irish people are receptive to new, innovative technology. Also, since Ireland’s traditional banking landscape was - until recently - dominated by a few companies, clients are ready to welcome new players such as N26 with open arms.

In recent years, the banking landscape has evolved significantly. From physical banking, we have celebrated Internet banking, and these days, our bulky desktops have to make space for a more mobile solution - mobile phone apps. Both Bank of Ireland and AIB have seen mobile apps overtake their online banking option on the desktop as the main channel through which clients prefer to handle their finances. According to an AIB spokesperson, this migration is common across all banks. Permanent TSB, Ulster Bank and KBC agree with the sentiments of AIB and Bank of Ireland. According to KBC, the first quarter of 2017 saw 60% of current accounts opened using digital channels. There’s no question that customers are increasingly opting for mobile technology.

Competition from new players is changing the banking landscape and driving innovation to continue delivering new tools and services to the modern consumer.

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Apple Pay was recently launched in Ireland, led by Ulster Bank and KBC. However, not all changes are quite as big. Most banks tend to focus on incremental changes and on making improvements to the user experience.

New Banking Innovations

Improvements to AIB’s app including Touch ID, a new fingerprint identification tool for iOS users. They also added the option for customers to open a savings account via the AIB app. Touch ID was also included in Ulster Bank’s app, along with a feature that helps app users to find their nearest ATM. The Get Cash facility allows users to withdraw money even without a debit card. By using a text or email directly from the app, users can share their IBAN and other account details. KBC’s customers have been quick to adopt the app feature that allows them to open a current account using their phones. All documentation can be photographed and uploaded using a tablet or phone, which speeds up the application process, but most importantly, it digitises the entire process. Bank of Ireland made upgrades to their app last year, and it is still ongoing. Much thought and effort is going into securing the app and delivering a smooth process for financial transactions and financial well being. Security is also a huge priority for Permanent TSB. A spokesperson said that customer feedback indicates that security is very important to their customers. As such, security is always an integral part of everything the bank develops. Clients want to know that their mobile transactions are secure. As such, the bank has assessed a variety of options, including biometric authentication, such as facial and voice recognition and fingerprint authentication to help improve the security of their apps.

The Banking and Payments Federation of Ireland (BPFI) foresees many more significant changes in the banking landscape. A digital transformation is evident as more consumer facing technologies appear across the banking sector, and we’ve only seen the start of it.

Keeping Up With a Changing Market

Regulators, on the other hand, are facing a number of challenges as a result of the changing face of digital banking. The Central Bank, in its Consumer Protection Outlook for 2017, indicated that they would focus on the impact of technology on its consumers. Due to the impact that technology driven innovation has on the way in which services and products are delivered, the Central Bank must consider emerging risks and the way in which their current consumer protection framework can eliminate those issues. The Central Bank is expected to publish a discussion paper and accompanying consultation paper on the matter in the coming months.

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Keeping up with technological innovation and a shifting market is costly for banks. Bank of Ireland recently commenced a multi-year investment programme which would see the replacement of its core banking platforms, as well as upgrades to its payment applications. Permanent TSB appointed a chief technology officer for the first time, ahead of its major digital transformation project. KBC established an innovation hub, to drive it’s digital strategy.

Will We See Collaboration?

The need for innovation is driven by customer expectations, whereby modern consumers expect to receive the same level of innovation from their banks that they have become accustomed to from other service providers. Customer expectations for end-to-end user experiences are shaped by companies such as Amazon, Uber and Airbnb. Customers expect the same level of digital experience from their banks. Banks are left with the pressing decision about whether they should go it alone, or collaborate with fintech companies when it comes to the development of their technology. According to BPFI, this is a question of collaboration versus competition. Banks and fintechs pointed to collaboration as a means to harness new technology at a BPFI conference earlier this year. Contributors felt that collaboration would benefit both customers and banks, as it would build trust amongst consumers. AIB has a dedicated fintec department which works with identified fintech companies on the bank’s digital products function to enhance their value proposition to consumers. Their flagship projects include user experience enhancements, improvements to mobile security and providing online messaging. Permanent TSB also values the role of partnerships with fintech companies, and will be expanding their own engagements. Ulster Bank’s innovation solutions team is based in Dogpatch Labs in Dublin. Dogpatch Labs is a co-working space frequented by tech start-ups. Here, the bank works closely with the fintech community, focusing on ways in which the innovation can be harnessed for their customers.

AIB has over 1.2 million active digital customers, of which 650,000 use mobile banking. The number increased by 23% on last year, making mobile AIB’s most active channel.

Mobile Banking By Numbers

Three in every four Bank of Ireland customers are digitally active. Eight million of these customers interact on the mobile app every month. The bank’s mobile app has seen a yearon-year increase of 35% from last year to this year of active customers using the mobile app. At KBC, digital banking has increased by 83% among consumers, in the period January to March 2017, compared to the same period in 2016. The number of clients opening an account online has also increased by 37% in the same time frame. About two-thirds of Permanent TSB customers actively use their mobile banking app, and the number continues to grow. After the release of their new app at the end of last year, mobile usage has outgrown desktop. Mobile is clearly their clients’ first choice. Ulster Bank has seen a 22% increase in active mobile app users. In 2016, 62% of the bank’s customer interactions were digital, and 10% in branches.

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AVERAGE ANNUAL EARNINGS ROSE BY €400 IN 2016

The accommodation and food services sector had average annual total earnings of €17,214, the lowest of the sectors. Total employee earnings rose by 4% to €61.2 billion across the year, driven mainly by an increase in the number of people at work, as well as a slight rise in the number of weekly hours worked and the small increase in average earnings. Meanwhile, the CSO figures also show the total cost of employing labour increased by 4.1% in 2016 to €70.8 billion. Full-time employee regular earnings comprised €48.4 billion (68.3%) of the €70.8 billion total labour costs, while part-time employee regular earnings were €7.5 billion (10.6%). The other main components were €9.7 billion (13.7%) other labour costs, €3.2 billion (4.6%) irregular earnings, €1.6 billion (2.3%) overtime earnings, and €0.4 billion (0.6%) apprentice/trainee earnings. Total annual labour costs increased each year between 2011 and 2016.

Average annual earnings in Ireland increased by €400 (1.1%) to €36,919 last year, according to new figures from the Central Statistics Office. This compares with an increase of 1.2% between 2014 and 2015. Mean annual earnings have risen by more than €1,000 since the height of the economic downturn in 2011. Average earnings for full-time employees in 2016 stood at €45,611 (+1.2% on 2015), with the average for part-time workers coming in at €16,597 (+1.6%). The average hourly rate of pay last year was €22.04. The professional, scientific and technical sector saw the largest increase, at 6.4%, with average annual earnings rising from €41,973 to €44,667 between 2015 and 2016. However, the information and communication sector had the highest average regular earnings of €49,319 and highest average irregular earnings of €6,216, making it the highest paid sector in 2016.

IRISH ‘BLUE ECONOMY’ OUTPERFORMING GENERAL ECONOMY

“Emerging” marine industries had a turnover of €383 million and provided employment to close to 2,000 people, the study said. Overall, the sector represents some 1.7% of gross domestic product. Co-author Dr Stephen Hynes said that the figures showed steady movement towards Government targets for 2030 on “ocean wealth”, but noted that the influence of the ocean on Irish society was even more pervasive than indicated by the analysis. Current projections, according to Miguel Marques of Price Waterhouse Cooper, show that the global ocean gross value added can be doubled by 2030 and Ireland has the ability to substantially outperform this. He further identified ‘blue technology’, including aquaculture as key opportunities for Ireland with Brexit representing a potential opportunity for Ireland to reduce some of its dependences economically and diversify more.

Ireland’s small but significant “blue economy” is outperforming the general economy, an NUI Galway (NUIG) study says. The ocean economy had a turnover of €5.7 billion in 2016 and indirect economic value amounted to €1.57 billion, the study by NUIG’s Socio-Economic Marine Research Unit found. The study, which was published at the annual Seafest in Galway, said the ocean economy provided employment for more than 30,000 people last year, and found established marine industries had a turnover of €5.3 billion. Oil and gas exploration and production, marine aquaculture and tourism, and leisure in marine and coastal areas all experienced a significant increase in activity between 2014 and 2016.

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IRISH ECONOMY EXPERIENCES STRONG START TO 2017

It is expected that the good momentum in the exports sector will continue. Domestically, despite unemployment now at a nine year low and personal finances strengthening, headline retail sales growth has moderated. The slowing of retail sales growth is largely due to a 10% year-on-year decline in new car sales, however core sales, excluding motor, continue to show good momentum. The Government coffers meanwhile experienced a mixed start to 2017, however a strong performance in May has brought tax receipts back to within 1.4% of the government’s target.

The Irish economy experienced a strong start to 2017, driven largely by a robust export performance. Exports have to-date risen 10% year-on-year, with the country’s trade surplus expanding by 18% to €17.1bn, according to the latest Investec Irish Economy Monitor. This is particularly impressive given the currently sterling violation.

DUNGARVAN GETS €8M INVESTMENT

Around 6.5bn Panadol tablets are produced in Dungarvan each year — 150 tablets per second — exporting to over 70 countries worldwide. The company has been in Dungarvan for 37 years, and employs 700 people across two sites. The new facility uses locally sourced woodchips to create a carbon-neutral fuel source for the site and is part of GSK’s global sustainability strategy which supports the company’s carbon neutral policy. GSK Dungarvan site manager Brian Fox said the investment from GSK showed a significant vote of confidence in the Dungarvan facilities as well as in the capabilities of the town and the people of Dungarvan.

Global healthcare giant GSK has opened an €8m biomass energy facility in Dungarvan, Co Waterford, that will reduce its carbon emissions by a third. The facility is only the second of its kind in Ireland, bringing investment in the facility over the past two years to more than €23 million. GSK in Dungarvan produces a variety of over-the-counter pharmacy and oral care products and is the global home of Panadol.

more concentrated than they were throughout the 2000s. Commenting on the report, Goodbody Stockbrokers said that the abolition of water charges and the modest property tax presented an opportunity to address this issue but that the opportunity now appears to have been lost. They further commented that, analysing the implications of hard-Brexit on public finances the ERSI state fiscal space will be reduced by a further €600m in the first 3 years following a hard-Brexit situation. Goodbody’s concluded that while the economy continues to do well the ability for manoeuvre in public finances in the coming years was very limited.

ESRI WARNS ON PUBLIC FINANCES The ESRI has published its latest Economic Commentary which predicts that GDP will grow by 3.8% and 3.6% in 2017 and 2018. This is exactly in line with its Spring estimates. The most notable changes in the ESRI’s views relate to the public finances. It now expects the budget deficit to come in at 0.5% of GDP this year, higher than its previous forecast of just 0.1% of GDP. Following on from this, it warns of the concentrated nature of the tax revenues in Ireland. Using a measure of concentration (the Herfindahl-Hirchman Index), it shows that tax revenues are now significantly

Private renters in other major cities, including parts of Cork and Galway, are also paying up to 8% above the average national rent which now stands at €987 a month — up €1 on the previous quarter. However, while rents nationally continue to trend upwards, the data shows that quarterly growth was relatively flat, increasing by just 0.1%, down from 2.8% the previous quarter. RTB director, Rosalind Carroll, said the findings for the first quarter of 2017 suggest the rate of increase in private rents is moderating. The new figures show no additional parts of the country meet the criteria to be designated RPZs. A public consultation was launched on the review of the rent predictability measure and the RPZs system Meanwhile, a report by the Central Bank says house prices — which are expected to rise by a further 10% this year — are “not currently overvalued”.

FIGURES SHOW RISE IN RENTS EXCEPT IN DUBLIN The average rent across the country now stands at €987 per month. New figures by the Residential Tenancies Board show they have risen by just over 7% in the first quarter of this year, meaning the rate of increase has slowed. However, the cost of renting apartments in Dublin has dropped by 1.5% this quarter. The Residential Tenancy Board (RTB) said it’s still too early to say if the slowdown is linked to the introduction by the Government last year of Rent Pressure Zones (RPZs) — a move which capped hikes in high-rent areas. The first figures since the introduction of RPZs, show while rent rates in Dublin dropped slightly in the first quarter of the year compared to the same period last year, the capital’s rental rates are still running at 8% above their late 2007 peak.

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HONE YOUR SKILLS AS AN INSPIRING LEADER

Organisations make revolutionary breakthroughs when their employees are engaged and inspired. Inspiration leads to an increase in productivity, which in turn inspires others around them to reach higher.

The good news is that you don’t need to be a born inspiring leader. You can actually hone your skills to become a rare asset to your company. Employer surveys conducted in conjunction with the Economist Intelligence Unit have shown that less than 50% of respondents agreed or agreed strongly that they had inspiring leaders who unlocked employee motivation. Even fewer were of the opinion that their leaders modelled the company culture and values and fostered commitment and engagement. Bain & Company surveyed 2,000 people in a bid to learn what makes a leader inspirational, and their findings were fascinating. They found that inspiration alone is not sufficient, just as performance only may actually cost more than an organisation may wish to bear. Leaders who focus on inspiration alone may motivate their teams, however, mediocre results may undermine their efforts.

INSPIRING LEADERS COMBINE A UNIQUE BLEND OF STRENGTHS WHICH MOTIVATE TEAMS AND INDIVIDUALS TO ENVISION HUGE GOALS AND HOLD THEMSELVES AND THEIR TEAMS ACCOUNTABLE FOR THE OUTCOMES. AS SUCH, THEY UNLOCK HIGH LEVELS OF PERFORMANCE THROUGH EMPOWERMENT, RATHER THAN THROUGH CONTROL AND COMMAND. OTHER FINDINGS INCLUDED:

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ONE TRULY INSPIRING ATTRIBUTE IS SUFFICIENT

CHANGE YOURSELF BEFORE YOU TRY CHANGE YOUR EMPLOYEES

Subjects were asked about the attributes of their colleagues that inspired them, and they came up with a list of 33 traits that mattered in four areas, namely:

Even when you understand your company’s winning strategy, you will still have to develop new operating methods. Constructive disruption is the key to inspiring people to generate results and to put a stop to routines that weaken the organisational culture.

Development of inner resources optimism, self-regard, stress tolerance

Connecting with others empathy, humility, vitality

Setting the tone responsibility, unselfishness, openness

Leading teams sponsorship, servanthood, focus, vision

As an inspirational leader, you have to be careful to pick the right moment to reinforce an inspiring performance culture. Choosing the right time will result in real moments of truth and leadership, as you will see in these examples:

Alan Mulally joined Ford in 2006 with the vision to turn the business around. His bold actions changed the way the organisation operated. He chose the right moment to applaud his eventual successor, Mark Fields, for admitting to failure. This set the tone for open, honest communications, which was exactly what the company needed.

A diverse range of leaders inspire groups, which is why it is so important to find leaders who are the right fit to inspire and motivate your organisation, instead of wasting time looking for a universal archetype. As such, anyone can hone his or her skills as an inspirational leader by focusing on and enhancing existing strengths. While there are many different attributes that leaders use to inspire people, having a single trait is enough to double your chances of being a great inspirational leader. More specifically, if you rank in the top 10% of your peer group when it comes to a single attribute, can double your chances of being viewed as an inspirational leader.

After an eight-year hiatus, Howard Schultz returned to Starbucks, realising that the unique customer-focused experience he had cultivated, had taken a back seat. Diversification and automation had taken the lead and he had to make swift changes to the direction of the company. He took a bold step to shut down 7,100 stores in the US for three hours, in order to retrain baristas on the art of espresso making.

The most valued trait indicated by the survey respondents, was centredness. This trait enables you to be mindful, calm under stress, present, empathetic, and a good listener.

MATCH YOUR KEY STRENGTH TO YOUR ORGANISATION’S VALUE PROPOSITION

Workplace safety was Paul O-Neill’s focus when he became the CEO of Alcoa in 1987. He demanded to be notified of all workplace safety incidents within 24 hours, and as such, safety was dramatically improved. Alcoa’s worker injury rate fell to 5% of the US average.

A company can’t just hire any inspirational leader. In order to be effective, companies should hire leaders who reflect their culture, business model, strategy, and unique context. Companies set themselves apart by emphasising specific capabilities.

These single actions by famous leaders illustrate the phenomenon which is inspirational leadership. It starts with changing the way in which you do things in order to create change.

The same applies to leaders. Instead of choosing well-rounded leaders, companies should choose leaders who are ‘‘spiky’’. His or her spikiness must be aligned with the company’s methods for creating value. Spiky leaders zone in on the company’s competitive advantage, and obsess about the capabilities that make them stand out. They focus their resources on those capabilities, and give key players the tools and freedom they need to excel.

Research backs this principle, as shown by the research above. It is only by doing things differently that leaders can make lasting changes with phenomenal results. By behaving differently, you too can become an inspirational leader. Individual inspiration creates a gateway to discretionary employee energy, which is critical to optimising your human capital.

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TIPS TO PREVENT MOBILE CHARGES FROM ROAMING OUT OF CONTROL

What’s Changed?

The rules may have changed, but we all dread that ‘welcome’ message with warnings about maximum data limits from our mobile providers when travelling out of the country.

Over the last five years, the EU has actively worked at reducing roaming charges. However, Simon Moynihan of Bonkers.ie warns that while customers will benefit from better rates and terms, you should not get too comfortable. Instead, speak to your mobile provider first and find out exactly how much data you have available before travelling abroad. While you can roam at the same price you pay at home, there are limits to the extent. Many plans only offer 1GB for roaming, and 1GB doesn’t go far.

15th June 2017 was ‘Roam Like Home’ day, the day on which the EU enacted new legislation that scraps roaming charges. Sadly, not much has really changed. In this article we’ll tell you what you need to know about Roam Like Home, and how you can save on roaming costs.

Will It Be Unlimited? No. Even normal data packages already have built-in fair use limits. They are typically generous and most people don’t use them up. According to Virgin, the average customer uses approximately 2.6GB per month. Most unlimited packages have a 5-30GB fair use limit, and if you exceed it, you will be charged for the additional data.

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Fair Use

How Much Is a GigaByte, Exactly?

The EU fair use limits are not always the same. Meteor’s €10 pre-pay plan has a 7.5GB fair use limit and 2.1GB for roaming. Their bigger bill pay SIM-only package offers 10GB locally and 7.4GB abroad.

You would be shocked to find that 1GB does not go very far well, depending on your preferred usage. For 1GB, you can:

In most cases, bill-pay plans have more restrictions than prepay plans.

listen to about 160 songs on Spotify

travel via Google Maps for 17 hours

watch Youtube videos for 300 minutes

or watch an hour of Netflix.

Many plans still allow only 2GB of roaming, so when you travel a lot, you could easily hit your limit.

What Is Free?

How to Save Data While Roaming?

Depending on your phone usage, you may be able to find a plan that offers services such as data, texts or calls free of charge. In most cases, a bill-pay plan that charges more than €30 a month will provide the most freedom. You will still receive the welcome message when you roam and you will get warning texts at certain intervals.

What Will They Charge? Although penalties are capped under new EU laws, you will be subject to penalty fees if you exceed your pre-determined data roaming limits while travelling abroad. Roaming charges for exceeding the limit, starts at €7.70/GB of data. These charges are set to decrease to €2.50/GB by 2022.

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Ask your provider for the exact data allowance on your specific plan.

Switch off roaming and use Wifi whenever you can.

WhatsApp is the cheapest option for messaging, as it uses much less data compared to Facebook and texting.

Turn off auto-updates on apps, and disable Facebook’s auto-playing of videos. You can leave notifications on.

Download shows from Netflix before you travel if you want to use that to keep small kids entertained and turn off data before giving them your phone.

If you have not reached your data limit at home, you’re unlikely to exceed it while travelling. Relax, but be sensible and enjoy!


LEGAL BRIEFS

employers conducted by CareerBuilder, an online recruitment company. The regulators, who together form a group on data protection known as the Article 29 working party, do not themselves make EU law. But since they police the law’s implementation in the 28 member states - and seek a common interpretation with which to do so - their role is highly influential. Prospective employees must be told before they submit their job application if the company intends to conduct an audit of their social media profiles, and employers cannot force employees to accept their friend requests. The working party’s opinion is also likely to govern the interpretation of a new and stricter EU law, known as the General Data Protection Regulation, which is due to come into force in May 2018.

EU REGULATORS CLAMP DOWN ON EMPLOYER SOCIAL MEDIA SEARCHES Employers who check a job candidate’s Facebook or Twitter profile before deciding whether to hire them may be in breach of European law, top regulators have said, as the EU tightens its data protection policies. According to guidelines published by EU data protection agencies, employers will from now on require a “legal ground” before checking the social media profiles of potential employees. The regulators add that data collected from a search must be necessary and “relevant to the performance of the job”. An estimated 60% of employers use social networking sites to screen potential candidates before making decisions, according to a survey of more than 2,000

bail to serious offenders including the extent to which the nature and frequency of previous offending indicate persistent offending and the danger to individuals or the community, which may be presented by release on bail. Courts will also have more options in imposing conditions on those who are granted bail, including prohibiting an accused from contacting victims, prohibiting him or her from driving when charged with a serious road traffic offence, and the imposition of a night-time curfew. Other features of the bill include electronically monitoring compliance with bail conditions when requested by the prosecutor, hearing victim evidence at bail proceedings and a requirement that the court give reasons for bail decisions.

NEW BAIL LAW APPROVED BY OIREACHTAS Legislation providing increased guidance for the courts and greater transparency in the bail process has been approved by the Oireachtas. The Criminal Justice Bill 2016 completed its final legislative stages in June. Justice Minister Charlie Flanagan said it would “strengthen the powers of the Courts, and of the Gardaí, in dealing with persistent serious offenders and persons on bail who pose an ongoing threat to the public”. Under the Bill, courts will be required to take additional factors into account when considering whether to refuse

BILL AIMS TO ENCOURAGE MORE TO SETTLE THROUGH PERSONAL INJURIES ASSESSMENT BOARD

would strengthen the operational powers of the Board and ensure greater compliance with the Board process. It will also provide for the Book of Quantum, an important benchmark for damages claims for practitioners, to be reviewed every three years. The Minister further commented that it is another step in the Government’s efforts to address the increasing cost of insurance, as the cost of settling personal injury claims is recognised as a major contributory factor to these costs.

The general scheme of a Bill to encourage more claims to be settled through the Personal Injuries Assessment Board has been published. Former Justice Minister, Frances Fitzgerald said that the Personal Injuries Assessment Board (Amendment) Bill

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The campaign is being coordinated through the International Network of Civil Liberties Organizations (INCLO), of which ICCL is a member. The group says international information-sharing agreements between intelligence agencies potentially allow those agencies to sidestep domestic legal constraints by funnelling surveillance data into a transnational intelligence network. In his correspondence, ICCL executive director Liam Herrick is seeking all details of the circumstances in which Ireland may share foreign intelligence surveillance data with another country. He is also seeking details of the circumstances in which Ireland may request or acquire electronic surveillance data from another jurisdiction. The action builds on a report by the INCLO last year entitled Surveillance and Democracy: Chilling Tales from Around the World. The organisation said it would publish all documents released on foot of the requests submitted in June.

HUMAN RIGHTS WATCHDOG SEEKS DETAILS ON FOREIGN SURVEILLANCE A leading human rights watchdog has asked the Government and the State’s policing and defence agencies to release details of how they share intelligence surveillance with other governments. The Irish Council for Civil Liberties (ICCL) submitted requests under the Freedom of Information Act to the Department of Justice, An Garda Síochána and the Defence Forces seeking information on the State’s information sharing agreements with other countries. It informed the agencies that the arrangements “dramatically implicate the privacy of every person, both nationals and nonnationals”. However, to date those arrangements are largely shrouded in secrecy, it said in correspondence to all three bodies. The requests were submitted as part of a global public information campaign aimed at uncovering international information-sharing agreements between intelligence agencies.

LAW MUST ‘REGARD’ POLYGAMY REALITY

‘‘potentially’’ polygamous is capable of being recognised under Irish law. This would occur in the case where a man has one wife and could take a second wife under the legal system of his native country, but has not yet done so. There was no bar in public policy to recognising this first marriage as legal in Ireland, even if the man subsequently takes a second wife, the court said. Recognition of an ‘‘actually’’ polygamous marriage would be contrary to a fundamental constitutional principle, equality, and therefore contrary to public policy, the court said. In finding the second marriage not valid under Irish law, it said the institution of polygamy is not contemplated by the Constitution and is contrary to principles of various international instruments. Giving legal recognition to such a structure would ‘‘give legal effect to discrimination and subordination in a relationship where the principle of equality should hold sway’’.

Polygamous marriages may have ‘‘legal consequences’’ in Ireland - without actually being recognised under Irish law. A seven-judge Supreme Court sitting, in June, unanimously ruled that the first marriage of a man living here with two wives, both of whom he married in his native Lebanon, is valid under Irish law. While his second marriage was not valid here, it may have legal consequences, the court said. The case was rooted in immigration and it ‘‘may be desirable’’ to have some regard to the reality of family bonds, the court said. The now 64-year-old man, while living in Lebanon, married his first wife in 1975 and his second in 1988 and has children with both. Under Lebanese law, a man can have up to four wives. He first came here in 1998. A marriage that is

HATE CRIME LEGISLATION ‘NOT FIT FOR PURPOSE’ AS FOI REVEALS JUST THREE CONVICTIONS IN THREE DECADES

has introduced a Private Members’ Bill, currently before the Oireachtas. The legislation is not fit for purpose according to antidiscrimination campaigners who said a broader regime is needed as racist incidents increase. A survey by the Immigrant Council of Ireland said there were 240 reports of racist incidents in 2015, a jump of 11 per cent on the previous year. Of these, about 40 per cent were against Muslims. Of the two people jailed under the 1989 Act, one served a month in 2012 and another served four months in 2014. Of the 44 cases, 22 were struck out or dismissed while seven were withdrawn by the Director of Public Prosecutions. Shane Curry of the European Network against Racism, said the law was “not fit for purpose” and this is a view shared by several international monitoring bodies. He added that actual hate-crime legislation is needed not incitement to hatred legislation.

There have been only three convictions for hate crimes in the past three decades, according to new figures. Ireland’s hate crime legislation, the Prohibition of Incitement to Hatred Act 1989, makes it an offence to make or distribute discriminatory material. Offenders can be jailed for up to two years or fined. The Courts Service has now revealed, under a freedom of information request, that there have been 44 prosecutions under the Act since 2000, five of which have resulted in convictions. It said there are no figures from before the year 2000, though the Department of Justice said that no convictions had been recorded by 2000. The Department said it is considering reform of the law while Fianna Fáil

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MEET THE TEAM Denis Lane

Gary Buchan

Senior Partner

Audit & Tax Compliance Partner

Denis is an experienced Accountant and an affiliated member of the Institute of Certified Public Accountants in Ireland. Having trained with one of the major international practices, he subsequently worked in the UK and also spent time as a Senior Accountant in industry. He has been in practice, as Founding Partner in the Firm, since 1978. He has a broad and practical knowledge of many business types and a wealth of experience in solving and providing solutions to the many financial and taxation problems associated with effective and successful Business Management. This includes Incorporated and Unincorporated entities, Partnerships, Family Businesses, covering a large variety of different businesses and professions. He is also a qualified Personal Insolvency Practitioner. In these difficult times, Financial Restructuring and Insolvency Advice are frequently needed for many businesses.

Gary is a qualified member of the Institute of Certified Public Accountants in Ireland. A Statutory Auditor and qualified Personal Insolvency Practitioner, he has over a decade’s experience dealing with the audit, taxation and advisory issues of a variety of business enterprises. Having trained and worked in practice during this time, he has gained a wealth of knowledge in the fields of Accounting and Taxation. As a Partner, Gary is committed to achieving excellence by ensuring that a high quality service is continually provided to our clients. Keeping up-to-date with the latest IT and business management innovations is an area in which he takes particular interest, and he is experienced in the practical implementation of the related business solutions.

Siobhan Hanlon

Jennifer O’Flynn

Audit & Taxation Manager

Audit & Taxation Senior

Siobhan is a qualified Certified Public Accountant, having been admitted to full membership in 2005. Siobhan has been in practice throughout her working life, having gained an in depth knowledge of Business, Taxation and the many other issues facing individuals and SMEs. She works closely with our clients, to assist them with their various business needs by applying this experience in finding practical and effective solutions.

Jennifer is a member of the Association of Chartered Accountants having joined the practice in 2004 from overseas. Jennifer is a valuable member of our team with detailed and practical knowledge of the Taxation and Accounting issues facing individuals and SME owners having developed a professional relationship with the clients of the Practice.

Gerard Murphy Accountancy & Payroll Ger is a vastly experienced and qualified book-keeper, with an in-depth knowledge of VAT, Intersat and Nominal Ledge processing. Ger is a member of the Institute of Accounting Technicians in Ireland and has worked in practice for 20 years. Ger also specialises in Payroll, is up to date with the issues facing employers in Ireland, and is on hand to provide practical advice to our clients.

&

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RANGE OF SERVICES ACCOUNTING AND BOOK KEEPING

INDIVIDUAL SERVICES

•• Financial Back Office Services •• Compilation of Financial Information

•• •• •• •• •• ••

AUDIT AND ASSURANCE •• Independent Audited Financial Statements •• Comprehensive Reports

GENERAL BUSINESS CONSULTING

PAYROLL SERVICE

•• •• •• •• •• •• ••

•• Process and Maintain Payroll Function •• Fully Trained and Experienced Staff

TAXATION AND PLANNING •• Representation of Companies & Individuals

in the Negotiation Process

•• Revenue Audits •• Preparation of Tax Returns

•• Assist with Company Formations & Business Plans •• Preparation of Financial Projections, Cash Flows & Finance

•• •• •• •• •• •• ••

•• Avoid Extensive Legal Arbitration •• Includes Financial Modelling

COMPANY SECRETARIAL •• Company Formation •• Filing of Statutory Returns •• Business Name Registration

Cork

•• Liquidation Process •• Negotiation •• Restructing of Financial Obligations

FORENSIC ACCOUNTING

MEDIATION SERVICES

85 – 89 South Main St

Strategic Planning Buying & Selling a Business Obtaining Finance Cashow Management Financial Budgeting Interim Financial Statements Preparing Forecasts & Projections

INSOLVENCY

BUSINESS START UP & WORKING CAPITAL PLANNING

Hanover House

Personal Finance Planning Retirement Planning Business Succession Advise in Minimising Tax Burdens Mediation & Negotiation Mentoring

(P) (021) 427 2320 (F) (021) 427 6983 www.gordonlane.ie info@gordonlane.ie

Personal Injury Loss of Earnings Matrimonial Proceedings & Settlements Fraud Investigations Business Interruptions & Economic Loses Mediation & Arbitration Company Valuation & Due Diligence

Profile for publications

Gordon Lane & Co August 2017  

Gordon Lane & Co August 2017