Irish trepidation ahead of May’s Brexit speech

A keynote Brexit speech by UK Prime Minister Theresa May is anxiously awaited amid expectations she will realise the worst fears of Irish business and Government and confirm that London is intent on striking a hard Brexit deal with Brussels.

Irish trepidation ahead of May’s Brexit speech

Analysts here warn that her speech on Tuesday could spark a further bout of selling for sterling against the euro, an outcome which would heap even more pressure on Irish firms selling across the Irish Sea because a weak sterling makes their exports of goods and services so much more expensive.

Conall Mac Coille, chief economist at Davy Stockbrokers, predicted that markets would likely be highly sceptical of the comments Ms May will make on Britain’s exit plans, saying that no matter what she says, sterling would likely face “another sell-off”.

Amid signs her government is taking a hard line, when and if formal talks with Brussels over its EU divorce terms, begin in the spring, sterling this week fell back to below 87p, a level last seen in early November.

Ms May has said she will trigger the start of formal talks under Article 50 of the Lisbon Treaty by the end of March, but those plans may yet be delayed by political or legal considerations.

Noting that the UK currency was hit hard by the resignation of its ambassador to Brussels this month, sterling could fall back to its October low of below 90p as early as next week, if markets do not like what they hear from Ms May, warned Alan McQuaid, chief economist at Merrion Capital.

“If she is not convincing, the currency will fall,” Mr McQuaid said.

Head of policy and chief economist at the Irish Business Employers’ Confederation, Fergal O’Brien, said many observers on this side of the Irish Sea were now braced for an adverse Brexit outcome for Ireland, as the UK government makes immigration its number one issue “even if there is to be an economic cost” for Britain.

The soundings from Europe suggested the EU powers were not going to relinquish the principle of free movement of people to meet the UK’s demands.

“A benign” outcome for Ireland from some sort of soft Brexit has therefore been “taken off the table”, said Mr O’Brien, adding that the British government needs to be made more aware of the importance for businesses here of an uninterrupted access to an-island economy.

Supply chains for businesses rely on a healthy all-island economy and “at the end of the day there is no other economy as affected as this one”, he said.

John Whelan, a leading consultant on Irish trade with the rest of the world, said that Ms May will probably say that the UK will seek to control immigration in the looming talks with Brussels, and that the UK will not strike a deal over free trade.

There were opportunities under a hard Brexit for Ireland to exploit, but “our agri-food industry will be severely hit”, said Mr Whelan.

There are signs that powerful UK industries, such as the City of London, which rely on free trade have also grasped that Ms May’s government would keep pressing for immigration controls.

The lobby group TheCityUK this week dropped its campaign to maintain full so-called passporting rights to sell financial services from the UK across the EU after Brexit.

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