JIM POWER: Huge task for Irish firms to cut their British market ties

Ahead of the UK general election on June 8, Brexit has pretty much disappeared from front page media.

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However, once the election is out of the way and the Conservatives come back with a larger majority in parliament, then it will return with a vengeance as the real negotiations get going.

Meanwhile, some effects are being felt here in both a positive and negative sense. The UK insurer and asset manager Standard Life announced that it is likely to choose Dublin as its EU base once the UK leaves the system.

Making the announcement, the company stated that it cannot take a chance on the type of arrangement that might exist for UK-based financial services companies selling into the EU. Currently, to sell financial services across the EU, an EU banking passport is required and there is no guarantee that such a passport will be available to UK companies selling financial services into the EU once the divorce is completed. From a prudential risk management perspective, companies will be obliged to make their intentions known at an early stage.

Any business in any sector that does not make contingency plans for a hard Brexit will be doing its shareholders a major disservice and could certainly be accused of corporate negligence at the very least. Standard Life already has a presence in Ireland and employs staff here, so the decision to set up the EU base in Ireland is not that difficult. Barclays may well turn out to do the same thing in Ireland. It will be a different matter entirely trying to convince companies without an existing presence here to make that decision as the competition from locations such as Brussels, Luxembourg and Frankfurt will be intense.

The US investment bank JP Morgan also stated that it is buying an office block here and plans to double its workforce in Ireland to 1,000 people. That represents a major vote of confidence in Ireland. While it is not Brexit-related, it does show just how positive the Irish environment is for financial services activities.

If we prioritise the delivery of suitable office accommodation, affordable high quality residential accommodation for renters and purchasers, a health service that we can trust in, and access to high-quality primary and secondary accommodation, then the sky would appear to be the limit.

Ireland is in a bit of a sweet spot at the moment in many respects, with the increasingly better looking external economic environment starting to pay heavy dividends. Trade data this week showed that merchandise exports in the first three months of the year were 10.6% ahead of the same period in 2016. Exports to the eurozone increased by 3.8%; exports to the US increased by a scarcely believable 31.2%; and encouragingly, and sales to the UK increased by 4.5%. Exports of chemicals and related products to the US increased by 36.7%, which is quite extraordinary. Time might tell what is going on there. Interestingly, sales of food and live animals to Britain increased by 7.2%. Sterling has strengthened a bit and more importantly has stabilised, and the UK economy is still holding up well. Overall exports of food and live animals increased by a strong 9.8% in the first quarter.

The overall trade performance so far in 2017 is holding up very well and there is little reason to believe that this will change very much over the remainder of the year given the increasingly positive momentum building in the global economy.

Enterprise Ireland alluded to the more difficult task that the exporting companies that it supports faced in the UK market last year due to sterling weakness. Its strategy is now going to be increasingly focused on building markets in eurozone countries. This is a noble aspiration, but the reality is that the UK is by far the easiest market for Irish agri-food exporters to sell into. A massive 37% of agri-food exports went to the UK last year, and it is estimated that of the prepared consumer foods that Ireland exports, 70% go to the UK. It will not be easy to wean exporters off the UK market.

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