Brexit uncertainty for Irish business
Now that Brexit has actually happened we can begin to take stock of how it will affect Ireland, writes Aideen Ginnell
Free trade between Ireland and the UK has always been a pillar of the Irish economy.
Yes, our exports to the US, China and mainland Europe have significantly increased in recent years, and hopefully these will continue to flourish while also serving as a benchmark for future trade agreements.
But a much higher proportion of exports to the UK are from indigenous Irish industries where the real economic value added is considerably greater. We also cannot move away from the fact that more than one-third of Irish imports come from the UK.
There was much to ponder on that surreal Friday, then, when Britain (and to some extent Ireland) drifted into immediate economic and political disorder.
What is fascinating about the ‘great democracy’ is that within a few hours, the effects of a democratically cast vote ensured that France overtook Britain as the fifth largest economy in the world.
With a flick of the democratic switch, Ireland too was plunged into volatility. While we didn’t see any immediate devastation – mass shop closings or public unrest – a barrage of negative forecasts and market doom predications ensured that uncertainty was the order of the day.
And let’s face it, there are few things more damaging to business than uncertainty.
A likely UK slowdown will impact directly on all aspects of Irish society, from the businessman to the farmer to the Irish student in the UK.
(For Northern Ireland things look even more gloomy, for example with the loss of the single farm payments and EU subsidies – a catastrophic blow to any farmer.)
Irish Ministers raced to convince the public that Brexit will have no effect on Budget 2017, even if forecasts suggest otherwise.
What the Government really needs to focus on, however, are bilateral talks between the UK and Ireland on issues such as the north/south border, the common travel area and trade agreements.
The effect on Irish business
So Brexit has brought two dangers to Ireland: an initial curb on growth due to uncertainty in markets; and a long term (far more damaging) threat to trade.
A win for the ‘Remain’ camp would have spelled business as usual for Irish companies, instead of the uncertainty they now face.
Firstly, the fall in Sterling has made their products less competitive in the British market. Secondly, it has put the brakes on expansion plans due to the unforeseen outcome of a new trade agreement (if any) between Ireland and Britain, and Britain and the EU. And thirdly, nobody knows for sure what their working rights will be once Article 50 is enacted.
The challenges facing Irish businesses, and indeed British companies, would be slightly lessened if EU/UK talks begin straight away. That would also calm some of the nerves that are crippling the markets. The EU’s Jean-Claude Juncker is pushing for Britain to make the move while political upheaval in London is making that impossible.
As long as things drag on, huge damage is being done to trading, importing and exporting as well as the property market.
Rewind the clock to when the Irish Government proclaimed it had a carefully worked-out Plan B in the event of a dreaded Brexit. Did they?
The bottom line is that Irish goods are now more expensive to bring to Britain. A coherent trade plan is now urgently needed to restore confidence to the business community.
If the Irish Government can negotiate a favourable agreement with the UK, Irish companies might even benefit in some way from Brexit. What about an FDI campaign promoting Ireland as an English-speaking gateway between three of the world’s biggest economies (the UK, US and EU)? We are, after all, the only EU member that has a border with Britain.
In the meantime, I think it’s clear that the Government’s aim is to position Ireland as a committed EU member but one with special bilateral interests aligned with the UK (Northern Ireland).
We will continue to be good Europeans but won’t hesitate to play the NI card to try and put in place a trade agreement with the UK. If the Taoiseach succeeds in this, it would be a political/diplomatic masterstroke.
We are about to see just how far our Government is willing to go in order to protect the national interest, and if they are willing to put this interest in front of our close ties with Britain. Interesting times ahead!
Aideen Ginnell is a Senior Client Executive with Cullen Communications, specializing in Public Affairs