Understandably, there is a great deal of concern surrounding the issue of the recent Brexit vote in the UK.
Nat Ross’ Managing Director, Robert Gilbert attended the Brexit Event - Implications for Irish Business at the Shelbourne Hotel, last week.
Here, the economist, Philip O’Sullivan outlined the possible consequences for Ireland:
Short-term consequences for Ireland
- Exports to UK (a sixth of the total) face the headwind of a weak pound
- Competition from UK imports will be unhelpful for many domestic firms, but it will also result in some cheaper input costs for some firms
- Business and consumer confidence will be knocked, hitting investment and retail sales
- But Ireland could also grow its share of FDI to (part-?)Compensate for this
- Government likely to temper fiscal plans
- Growth to moderate – every 1pc drop in UK GDP moves Irish GDP by 0.2pc. Irish growth should still beat most advanced economies.
Long-term consequences for Ireland
- Estimates from leading research houses (IFO Institute, Oxford Economics, and LSE/CEP) suggest that Brexit could permanently reduce Irish GDP by between 0.8% and 2.7% relative to baseline.
- However, the reality is that we don’t know what the ultimate impact will be as it all hinges on the nature of trading arrangements struck between the UK and EU
- Irish exporters likely to have to deal with a structurally lower sterling as UK’s ‘safe haven’ status has gone the way of its AAA rating. Major changes to supply chains likely to be needed.
- Ireland could win big from relocation of operations out of the UK e.g. financial services. Openness to skilled migrants could also help boost investment. But can our property markets handle all that this means?
Foreign Direct Investment (FDI)
Foreign Direct Investment (FDI) has been, and will continue to be, an integral part of Ireland’s economic development strategy. Foreign-owned firms contribute substantially to Ireland’s exports, jobs, expenditure in the Irish economy and to Exchequer funds.
FDI plays a key role in stimulating the development of ‘new’ sectors in Ireland, in enhancing research, development and innovation performance and in accelerating the achievement of critical mass within sectors.
IDA Ireland is the principal agency charged with attracting foreign direct investment to Ireland. IDA Ireland provides a wide range of supports and grants to both new and existing clients.
Google has become the flagship for FDI in Ireland so far in the 21st century. Google’s reputation is such that every technology investment in Ireland cites the company’s presence as a major influence in its decision to come here.
The reputational benefit of Google’s choice of Dublin as its EMEA headquarters here has undoubtedly proven to be of even greater value than the significant employment value itself. Each announcement of technology investment in Ireland cites Google’s presence here as a major influence on the decision to base itself here.
Google’s EMEA in Barrow Street in Dublin provides technical, sales and operations support to customers in over 50 countries, currently employing 2,500.
Google has adopted a “wait and see” approach to the Brexit referendum in Britain next week and will not make any decisions about its operations until it sees the result, the company’s head in Ireland has said.
Irish government officials conclude that the medium to long term effects of Brexit will take some time to become apparent. In the meantime, they advocate a cautious approach to reassure and stabilize the markets to allow Irish business to continue to take advantage of new opportunities that might emerge and to build on the economic recovery.
"to build on the economic recovery that began to emerge prior to Brexit"