The Brexit vote has created much unease on Irish shores. Ian Talbot, CEO of Chambers Ireland, puts it in perspective.
Ian, what can we expect to be the immediate effects of the Brexit vote?
The most significant immediate effect is currency volatility and trying to predict what will happen with sterling over the next few months. However, the world of business is well used to volatility. Right now, [11.45am yesterday morning] sterling is at 0.81 and it has been considerably worse than that in the recent past. In the early years of the eurozone, it traded typically between 0.65, and 0.70. Then in late 2008, at the height of the financial crisis, it went as low as 0.96. At that time, there were photos in the newspapers of people from the Republic stuck in traffic jams en route to shopping in Newry. But thanks to quantitative easing in the eurozone, the euro is also weaker and the difference with sterling is not half as bad now as it was in 2008 to 2009.
Are there other immediate effects?
Yes, if share values drop, it will impact on both companies and individuals, for example, if a company operates a defined benefit pension scheme, it may have a responsibility to top up pension funds. Individuals with a defined contribution scheme will find the value of their pension funds falling and may need to plan increased contributions.
What are the more medium-term effects?
There are a number of core issues, one of which is what will happen at the border with Northern Ireland and whether we will see the introduction of customs and passports. Will we have to queue to show passports? Are there products or services that in the event of the UK not being in the single market will be subject to tariffs? Will we see articulated lorries queuing for an hour and a half to get through border posts? Will we have a scenario where drivers are asked “What is in the truck?” and depending on the goods, they may be taxed. If hard borders are to be imposed, at this stage we do not know where they will be, whether they will be between north and south of the island or if they will be across the Irish Sea. We don’t know if ultimately people travelling from the north will require a passport to visit Manchester.
How have other countries in Europe who are not part of the EU approached issues such as membership of the single market?
There are various methodologies. For instance Norway is not in the EU but is part of the European Economic Area (EEA) and has full access to the single market. To obtain this access, they make a very substantial contribution to the EU every year but cannot influence regulations and directives. This seems to have been a big issue in the Brexit campaign — that the UK was paying £350m (€431m) a week to the EU and getting nothing back. But that is not the case. Part of what they were paying for was their businesses to get access to the single market, which is similar to a benefit-in-kind — in that what you get back is revenue from exports, jobs created, taxes paid, and so on. Also in this EEA model they would have to comply with but no longer have the ability to influence the standards and regulations that apply to goods traded in the single market. But if the UK does not go into the single market and the regulatory standards the EU applies to medicines and medical devices differ from the UK for example, will a company have to go through two separate processes to get approval for a drug or device driving up costs?
How will Brexit impact on tourism between the two countries?
Again that predominantly comes down to currency and the impact of whether you are in recession or growth. If sterling is of low value, then it will be more expensive for UK visitors to take a weekend break in Dublin than in Manchester. (The UK accounts for approximately 40% of overseas visitors and is our largest source of inbound tourists.)
What about the impact on our export market?
If sterling remains weak, exports into the UK will be more expensive and less competitive but it will be cheaper for us to import goods. (Farming and agri-food exports are particularly exposed; 52% of Irish beef goes to the UK, 60% of cheese exports, and 84% of poultry. Enterprise Ireland said yesterday that companies should, as a first step, seek financial advice relating to hedging and managing associated risks.)
Are there any other opportunities?
Absolutely. Because Ireland has consistently said it will remain in the EU, we may be more attractive to certain foreign direct investment than the UK, for example, financial services companies that can passport their services across the EU — there is the potential for them to migrate over here rather than establish or remain in Britain.
Could Britain offer a more attractive corporation tax rate than the 12.5% on offer here?
There is nothing to stop them undercutting our rate even while in the EU. They had already planned to reduce their rate to 18% by 2020. Of course once they leave the EU, they may decide to tax foreign companies differently — under EU rules the same rates must apply to both domestic and foreign taxpayers. It may also decide it is possible to offer state aid to companies, which is not allowed by the EU.
Brexit and Health
Separately, the Medical Independent reported yesterday that the Department of Health confirmed nothing would change in the short term vis-a-vis extensive cross-border health projects such as services in Altnagelvin Hospital in Derry, deep-brain stimulation treatments in Belfast on an all-Ireland basis, the Institute of Public Health in Ireland and active co-operation between hospitals on both sides of the border on paediatric congenital heart disease care.
Complied by Catherine Shanahan
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