The astronomical growth of Dublin’s financial sector over the last few years was largely down to its ability to attract huge numbers of back office jobs within international organisations. Now, however, its appeal appears to have diminished.

The turmoil surrounding Ireland’s financial sector, particularly within its domestic banks, is no secret and now it appears to have damaged its reputation on the global stage.

Dublin has slipped by 13 places – from 10th to 23rd – in the latest Global Financial Centres Index, which ranks 75 cities in terms of their competitiveness against one another. More worrying, perhaps, is the fact that its scores continue to deteriorate while the vast majority of financial centres are showing signs of improvement.

“Dublin has taken a pummelling over the last six months,” says Mark Yeandle, author of lead author of the report at Z/Yen which conducts the research for the Corporation of London.

He adds: “A year or two ago financial services firms were moving a large chunk of their headcount to Dublin, because of the cost-savings it offered. You could hire people slightly more cheaply, and land and office prices were comparatively low. The cost differential seems to have virtually evaporated though.”

The number of new jobs created by international financial services firms in Ireland last year was 5,609, according to figures from the Forfás Annual Employment Survey – the smallest number for five years.

However, Kieran Donoghue, head of financial services at IDA Ireland, which promotes foreign direct investment, tells us they expect the figure to be broadly the same in 2009, rather than sliding further.

The emphasis has changed though, and Ireland is attracting more insurance and reinsurance firms, as well as research and development centres for financial technology software.

But Yeandle is not so optimistic: “I believe Ireland will languish for a while,” he says. “It needs to re-evaluate how it will compete, its fall in the rankings is down to more than an economic downturn – a structural change is needed.”

His comments echo a research note by Deutsche Bank analysts called ‘Iceland v Ireland: Is the difference really only one letter?’

It says: “Ireland is struggling to improve competitiveness while searching for a new business model.”