FROM an Irish economic and political perspective, there is ‘much to worry about’ in relation to Brexit, said Kinsale-based accountant Cormac Fitzgerald this week.
Among the factors to be considered are the impact on sterling, and hence on the competitiveness of the Irish merchandise and service export relationship with the UK.
Other considerations would be: the future trading relationship that would be negotiated between the UK and the EU over a protracted period; the border with Northern Ireland; the implications for the all-island energy market; and the future of UK corporation tax policy. Ireland is now also about to lose a strong and sensible ally around the EU table, particularly in the face of the strong Franco-German axis.’
‘Uncertainty is now the only valid term that should be applied to the world of business and economics in the immediate aftermath of the decision by the UK electorate. We are not going to wake up any morning soon to discover that the world has changed suddenly,’ he added. ‘In fact it will be life as normal until the negotiations conclude. However, uncertainty and fear will be rampant from here on. That will damage economic and business sentiment in the UK and the rest of the EU.
‘From an Irish economy perspective, the key issues will be:
the impact of an inevitable slowdown in the UK economy on exports to the UK; Irish-owned industry exports 53% of its output, with 44% of that going to the UK – a slowdown in UK growth will obviously damage that.’
Mr Fitzgerald added that sterling is likely to become significantly more volatile over the coming months, with the likely bias towards a weaker UK currency. ‘For Irish companies dealing in sterling, this will obviously be very challenging and difficult to manage.’
Weaker sterling would damage exports to the UK, he said, but could also have a significant negative impact on UK tourism to this country.
‘UK financial markets generally are likely to become much more volatile and a EU risk premium could become a feature.
Ireland could benefit on the FDI front, but this would not be sufficient to offset the potential negatives.’
For small business in particular in Ireland, Brexit poses enormous uncertainty, he said. ‘To cope with those challenges and uncertainties, business will need to be flexible, innovative, and focus more than ever on competitiveness. Irish business has shown itself to possess all of those attributes over the past seven very challenging years and it will again.’