IDA: Brexit should see foreign investment boost.
THE recent surge in the polls for the British Labour Party, as the UK general election campaign turns sour for Theresa May and her Conservative colleagues, has pushed down the value of sterling and created more doubt about her ability to achieve a frictionless Brexit.
Consumer confidence has fallen to its lowest level since the Brexit vote and it looks like the UK economy could stall as household debt soars.
This is all very unsettling for Irish exporters who may have thought they had weathered the post-Brexit vote currency storm. However, as many foreign investors opt to postpone UK expansion or investment plans until there is more clarity on who will form the next Westminster government and what kind of agreement the UK is able to strike with Brussels, there is increasing interest internationally in an Irish base from which to trade across the EU.
IDA Ireland chief executive Martin Shanahan, addressing a business grouping at the RDS in Dublin, stated that the UK is our main competitor for foreign investors seeking and English speaking stable economy from which to sell their services and goods into Europe.
In Mr Shahahan’s opinion 50% of the UK’s inward investment was associated with their membership of the EU and was now up for grabs.
Foreign direct investment into the Republic rose by 4% in 2016, a year in which the number of FDI projects into the UK fell by 9%. With 187 projects — valued at a combined €5.2bn —Ireland was ranked eighth overall for foreign direct investment (FDI) in Europe, according to a new report from fDi intelligence, a division of the Financial Times. However, the UK still managed to top the list for FDI into Europe in 2016 with 1,039 projects that were valued at €48bn; almost ten times higher than that into Ireland. The London School of Economics estimates that €22bn of inward investment would be lost post-Brexit.
The IDA chief was under no illusion that getting a substantial slice of the UK largesse would be easy. Most other EU countries are also chasing foreign investors who want direct access to the EU markets he said.
The UK financial services industry is the largest recipient of inward investment, making up 45% of the total. This is the sweet spot that the IDA is mainly focused on.
However, Mr Shanahan was anxious to advise that he expected all regions to benefit from Brexit . Speaking of the south-west (Kerry and Cork) which has a total of 30,419 people employed in IDA client companies with particular strengths in pharmaceuticals, technology and engineering, he said a 30%-40% uplift in investment would result in 139 to 150 new projects for the region.
But the US could have a considerable impact on Ireland if President Trump’s corporation tax reduction measures are introduced.
Historically, 70% of all foreign investment in Ireland has come from the US. As the UK moves toward Brexit, FDI into the UK is expected to decline.
Much of this is likely to be redirected to other EU member states.
However, the FDI report warns that if the Brexit negotiations lead to a breakdown in trade between the UK and the EU, then all investment levels into Ireland and the rest of Europe are likely to decline.
John Whelan is an expert on international trade
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