Businesses must make arrangements for the worst possible Brexit outcome

The confirmation that the UK will not seek to stay in the EU’s single market nor the customs union is the worst possible outcome for Ireland.

It will automatically ensure costly cross-border procedures are brought back into play on all exports and imports from the UK and with them punitive tariffs on many goods.

Further costs and procedural difficulties will also come into play for the many exporters who use the UK as a land-bridge to move goods to and from the continent.

If the UK is restricted from providing an efficient, competitive land-bridge into Europe for Irish exporters, many businesses will fail.

Theresa May hoped for “frictionless” access to the EU under a new free trade agreement; her threat of changing Britain’s economic model if the EU does not agree to such an arrangement is delusional, ill advised, and likely to impact adversely on Ireland’s international trade.

The threat by Ms May, to “change our economic model” if a full free trade agreement is not offered to Britain by the EU, has been aired by her cabinet colleagues and effectively refers to the UK reducing its corporate tax regime. If this threat were to bring into play a highly significant tax haven in the UK, then Ireland will have to look again at its international trade model.

The target of this proposal is most likely the concern the City of London stands to lose its so-called passport freedom to sell financial services in a frictionless manner across the open capital markets of the EU, once Britain exits the single market.

The threat to introduce tax and regulatory rules used in other low-tax international centres, such as Hong Kong or Singapore, to attract the EU capital markets would be a Rubicon decision by Britain, requiring robust defence by the EU. Ireland’s Financial Services Centre will inevitably be affected, regardless of the final negotiated position for Britain.

The one piece of positive news from Ms May’s statement was her determination to retain the free travel agreement between the UK and Ireland.

The UK will trigger Article 50 of the Lisbon Treaty at the end of March, paving the way for Britain to leave the EU over a two-year period.

Irish businesses will undoubtedly use this period to create a business arrangement to circumvent trade barriers that may be put in place, but also developing new trade arrangements more directly with Europe will become a priority.