14 July 2017
As the details of Brexit continue to be worked out, a number of companies have announced where they will relocate their business operations in order to maintain access to the EU single market.
The IDA has launched an aggressive advertising campaign across the globe in the hope of winning foreign direct investment, partly as a result of Britain leaving the EU. Ireland has taken steps to reinvent itself as an international hub of business activity, attracting people from all over the world to develop their skills in a world that is continually looking for new and better ways to communicate, process and store information.
Making the most of our 12.5% tax rate many multinational companies such Google, Facebook, Paypal, Microsoft and Yahoo have their office headquarters located in Dublin. What’s more, Ireland is home to nine of the world’s top 10 software companies and 15 of the world’s top 25 financial services companies.
There are still firms considering moving their operations from London to Ireland once Brexit gets underway. The Battle for Brexit continues as more and more companies look to move on from their London based operations.
As a result of our history, we have a common-law system, as does the UK, making Ireland an obvious place for any business that trades internationally. Culturally we're not that different than the UK. Ireland is now the only English-speaking EU member sharing many legal and institutional structures with the UK, as well as the same time zone.
These advantages may account for the substantial upsurge in the number of banks, financial institutions and manufacturing companies inquiring about relocating part or all of their operations to Ireland as a means of staying in the EU.
Many Irish developers have been pitching new office developments to both Irish and international firms in a bid to capture some of the international financial business, relocating post Brexit. When it comes to an international business transitioning to either France or Ireland, Ireland is going to present far less of a culture shock to many people.
Many organisations considering moves don't feel they can wait to see the final terms of Brexit before making initial relocation decisions, so we may start to see firm requirements from some in the near term.
Consistent foreign direct investment has led to the expansion of Ireland as a business hub, which is now being recognised internationally. However, considering this rapid growth of our country one must consider the effects of this investment on property, both commercial and residential.
If Britain leaves the European Union with no agreement on future free trade between the two, then the likelihood is that special import taxes, or tariffs, would apply on trade between Britain and EU countries. Thus, Irish exporters to the UK would face tariffs, at levels set down by the World Trade Organisation. Tariffs would also apply on British imports here, which would, in theory, push prices up in the shops.
Some sectors are particularly exposed. Tariff levels have emerged over many years of international trade. For historical reasons, and because countries have wanted to protect their own farming sectors tariffs tend to be higher on heavier products, particularly foodstuffs.
Food and agriculture sustain almost 10% of jobs in Ireland, and 40% of the sector’s exports go to Britain and Northern Ireland, leaving it badly exposed when the UK leave the single market.
While all Irish farm types would be negatively affected, the Irish beef sector appeared to be particularly vulnerable.
The beef sector could experience a fall in beef prices due to Brexit and lose some of its CAP funded direct income support payments, if the next CAP reform has to be designed to fit within a smaller EU budget that might result from Brexit.
So, tariffs on some kind of meat exports, for example, could be up to 50% using WTO levels, which would effectively price many Irish producers out of the UK market, and out of business.
While some sectors would be hardest hit, the economic shock would spread out through the economy. Lower exports would lead to lower spending by companies and employees affected and this would knock on to a general hit to employment and government revenues. Analysis suggest that employment levels could be 40,000 lower after 10 years and the unemployment rate could be close to two percentage points higher.
Keep your friends close…...
As a nation we often tend to focus on the negatives and occasionally forget to look for the light at the end of the tunnel. Regardless, the Brexit debate will linger, the whirlwind news from Britain has been and will continue to dominate all debate on the economy in the months and years ahead.
There is no doubt that there will be difficulties and financial implications for Ireland, however, it is important to not only focus on the negative outlook on Brexit, arguably there are some positive perspectives, it just takes some time to understand them.