The effect of Brexit on business in Ireland

In this week’s column, Kehlan looks at the effect of Brexit on business in Ireland and why all might not be doom and gloom as Britain prepares to exit the EU.

It was like watching a car crash in slow motion.

As Thursday night slipped into the wee hours of Friday morning it was clear that Britain had voted to leave the EU. From the outside looking in, all we could do was rubberneck. Watching to see the damage before moving on to see what it all meant.

Within a few more hours France would overtake Britain as the fifth largest economy in the world as Sterling fell off a cliff.

Ireland woke in the morning to the realisation that its largest market for trade would no longer be as easy to access as it had been. There are few things more damaging to a business than uncertainty and this has it in spades.

Throughout the morning, business leaders reflected on what it might mean for them.

No sooner had we all realised what had happened when David Cameron stepped down as Prime Minister.

Economic uncertainty was now infused with political uncertainty and all the ingredients of a recession were brewing nicely. Mark Carney, Governor of the Bank of England, made an address to the nation in which he pledged to stump up €250bn to ease concerns.

The whole situation has been a demoralising defeat for the EU dream. Amongst it all are the small businesses and startups who keep it propped up. What next for those who depend on the British economy to grow and export?

There has been a lot written in the past number days about what it means for Irish business.

In the short term, the exchange rate is causing the main concern. Irish goods are now more expensive to bring into Britain. In the long term, that will level out so long as some coherent plan makes itself known.

However, where there is doom and gloom there is also an opportunity. Now is the time that Irish companies should be creating even stronger links with their UK counterparts.

Irish companies can become the sales platform for UK goods into the continent; partnering with engineering companies to finish off products before being the exporter to the continent, for example.

Irish companies should be positioning themselves as the exciting new solution to what will be a UK problem. Like any business that faces problems, Ireland will need to think differently and more creatively as to how they can become essential moving parts in developing trade to the EU zone.

There will be opportunities and Irish companies need to be at the forefront of them.

The IDA also has a huge chance to entice would-be UK companies into Ireland. Morgan Stanley has already had to quell rumours that it is about to move 2,000 staff to Dublin or Berlin in the aftermath of the Brexit vote.

It will need to move quickly to take advantage of the uncertainty within surrounding the UK.

Northern Ireland has become a great springboard for companies to move into the bigger UK market. Expect that to become more challenging now.

Irish companies have also set up offices in the North in order to benefit from a more favourable tax system and better conditions for investors and venture capital.

The North may well find itself in another recession if money forthcoming from Westminister diminishes and jobs leave too. There has even been talk of Game of Thrones leaving the North.

However, we could also have an improvement in the tax and incentive offerings for businesses, in which case the North would position itself as a better prospect for companies, meaning the Republic could still lose out.

Strangely it could actually be our cousins to the North of Britain that may cause us the biggest concern.

Scotland has already announced that a new referendum on the future of it remaining within the UK is likely.

Over the past few years, and in particular since Nicola Sturgeon took over as First Minister, there has been a search on to find a more reliable economy for Scotland. At the moment, Scotland is largely at the mercy of energy prices like oil and gas for revenue.

The drop in the price of oil has forced it to reassess how it builds and creates a new economy. That will require attracting big companies and startups alike. Scotland going it alone could well be bad news for Ireland as they look to copy our model of recovery by competing for inward investment.

They will almost certainly make an application for acceptance to the EU, which may be ‘fast-tracked’ as sympathy aligns itself with the Scots overwhelming vote to remain in the EU.

We almost certainly have both a rural/city divide and an east-west divide within this country. The UK saw old mining towns and steel mill cities vote to leave the EU.

There is a lesson in all of this about how you treat businesses, the backbone of local economies.

How you encourage communities to support startups or make sure SMEs can be part of the fabric of both rural and city landscapes has a far bigger impact than what it may seem.

Those companies play a huge part in giving people not only a sense of economic self-control but also in giving them a sense of identity. In the UK we saw London, Liverpool, Manchester, Leeds and Newcastle all vote to remain.

I hope that in the coming weeks Irish SMEs begin to rally for solutions. There are positives to be exploited in Brexit.

Finding them will be a challenge but not impossible. We’re not talking about a glimmer of hope, we’re talking about something far bigger; a huge opportunity.

Ireland now stands in the middle of a triumvirate of connections. We already act as the connector of Europe to the US and can now do likewise for the UK.

We will be sitting in the midst of three of the largest economic zones in the world. This could be something special. We can make this work.

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