Whether or not you agree with the UK’s decision to leave the EU has now become irrelevant. What you need to know for business is now a matter of importance.Here are some key points for Irish SMEs and Startups to keep in mind:
While the vote has come through for the UK leaving the EU, it’s important to remember that leaving is still two years away. The economic impact of the leave is still very reliant on a number of factors. Not least on the negotiations which will take place between the UK and EU over the next few years. With the EU looking to stop other countries leaving like Britain has, it may be a case of careful what you wish for. Britain is important to a lot of other economies in Europe, not just Ireland. A balance will need to be struck which aims at economic stability while at the same enforcing the idea that you can’t just up and leave the EU. Negotiations will be tricky. However, with the resignation of David Cameron as Prime Minister, political upheaval has added to an economic one. In the short term, there was always likely to be a big seismic reaction to Britain leaving. In the medium term whether that lasts or dissipates depends heavily on the deal Britain strikes with the rest of Europe. A well-negotiated deal could be good for Ireland. Watch this space.
For Ireland there is a number of positives to take from this:
– Financial institutions are already looking around for places to set up where they can easily access the EU market. That puts Dublin front and center with favourable tax laws and an easy route to the common market. Knock on effects can be felt in the finance and fintech space if Ireland acts quick enough. Germany has already made advances to big financial institutions as a place for them to come to. Morgan Stanley has said they are relocating 2,000 staff to Dublin or Berlin.
– Importing products will be cheaper as the Sterling falls and becomes weaker. Already there has been talk of an unofficial ‘Black Friday’ deals fest on places like Amazon UK etc. Ireland already spends €1.2bn every week on products that come in from Britain. Importers may well see savings of up to 20-30%.
– What an opportunity for IDA Ireland to continue its good work of bringing big names to reside in Ireland. Access to the largest free market economic zone in the world has become all the more enticing. The IDA now has two years to really make a push and make Ireland even more of an attractive prospect to global traders and companies.
There maybe some pros but Ireland’s heavy reliance on British trade now means the cons out way the positive by some way.
– Exports to Britain just became a whole lot more expensive. The weakness of the Sterling against the Euro now means that overnight it became more expensive for Irish goods to reach the UK market. Our agri trade may see the biggest hit as estimates swirl around from a €200m hit to nearly a €1bn.
– Britain accounts for over forty percent of the tourism trade in Ireland. With the weak Sterling their prospect of travelling here diminishes. Irish travel destinations will need to get more creative as they won’t be able to compete on prices.
– Pensions will take a hit. If you have pension funds tied up in financial or trading institutions it’s going to hurt. Particularly those who are due to retire in the next few years. With the markets already reeling, expect uncertainty remaining for a number of months at least. Until some semblance of a trade plan comes forth, expect the markets to react accordingly.
– Northern Ireland has become a great springboard for companies to move into the bigger UK market. With renewed talk of the reset of the border, expect that to become more challenging. Irish companies have also setup offices in the North in order to benefit from a more favourable tax system and better conditions for investors and venture capital. New barriers means new barriers to business and the North may well find itself in another recession and money from Westminister diminishes and jobs leave too. However we could also have an improvement in the tax and incentive offerings for businesses in which case the North would put itself way out in front as a better prospect for companies. Meaning Ireland could still lose out. There has even been talk that the filming of Game of Thrones in the North may well end too as it garners EU funding and filming grants.
– Scotland has already announced that a new referendum on the future of it remaining within Britain is likely. Over the past few years, and imparticular 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 heavily dependent on energy prices like oil and gas for revenue. With the drop in the price of oil, it has had to reassess how it builds and creates a new economy. That means it needs to attract big companies and startups alike. Scotland going it alone could well be bad news for Ireland as they look to copy Ireland’s model of recovery by competing globally as a place to do business. They will almost certainly make an application for acceptance to EU, which will ‘fast-tracked’ as sympathy aligns itself with the Scots overwhelming vote to remain in the EU.
It has been clear from today that the worst kind of thing has happened for businesses, total uncertainty. What is important from now as that companies need to be informed of all things surrounding what is to come. The few months, as well as the next few years, will be very delicate for the Ireland’s connections with Britain and all that comes with it. What is certain is that the dye is cast, there is no turning back.