Ireland needs to stick with policies in face of Brexit turmoil
Against this backdrop the importance for Ireland to retain a steadfast commitment to policies that drive long-term investment decisions has never been greater. At a time when various political leaders abroad are trying to adopt radical changes an oasis of calm continuity should not be underestimated.
Consider the items that have to be interpreted and analysed by global investors at present.
Leaders of large asset managers are saying explicitly that they have no clue what consequences Brexit will have for the companies they invest in. That is because a large dollop of uncertainty has been dropped on both the cost and income lines of every company operating in the British economy. Costs cannot be measured because they are being bounced around by exchange rate and regulatory volatility.
A hard Brexit will drive down sterling and drive up labour costs, especially for low margin companies with high employee costs. Revenues are unpredictable because even the simplest measure — market access — cannot be guaranteed.
Those invested in America are operating amid major political convulsions that offer significant changes in regulatory and tax rules. However, a high degree of uncertainty surrounds any potential change, as evidenced by the failure to repeal Obamacare last week. If that key electoral change cannot be agreed then there is a lot of risk in assuming changes that are positive for investment taking place at any foreseeable point in time.
As these convulsions are ongoing Ireland has an opportunity to offer an alternative narrative. It, too, was faced with dramatic changes amid the financial crisis that began in 2008. If you remember, there were very loud voices calling for an exit from the euro, abandoning corporate tax commitments and a refusal to meet international debt obligations. For a period of time, stretching on to years, there were plenty of supposed serious commentators flirting with these ideas and some of them were taken up by political voices.
Ultimately, and in a measure of defiance, the Irish electorate decided to do something different — stick to its promises.
When Ireland asked global companies to make our country a core base for international expansion many years ago we promised a 12.5% corporate tax rate that would be long-term. We promised a flow of educated young graduates and a civilised society where the rule of law applied in corporate and personal life. We also assured these investors that Ireland was good for its word on its debt, even when the going got tough.
It got tough in 2008, and even worse in the ensuing four years. Because Ireland hung tough it developed a reputation as a place that took its obligations seriously. We are at it again now, with regard to the EU.
As the UK unfolds its Brexit flag this week public offices in Ireland will have two flag poles occupied with the Tricolour and the flag of Europe. While voices in the UK bang on about their future as Little Britain, Ireland will remain a resolute member of a market of over 400 million inhabitants.
While the UK chops and changes its stance about corporate tax, Ireland will point to a weathered but unchanged sign marked 12.5%.
These signals of continuity are key to understanding why there is limited drama around the installed base of global corporations in Ireland or the list of ones considering a move to the Republic.
Our best strategy, for now, is continuity of policies that helped modernise the Irish Republic while others select the reverse gear.
In the long-term this will create more wealth and opportunity for our nation while others adopt increasingly irrational choices.
Joe Gill is director of corporate broking with Goodbody Stockbrokers
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