Saturday 25 February 2017

Last UK vote on Europe never settled the issue - this one won't either

Richard Curran

Richard Curran

The UK could afford to leave the EU. It would take an economic hit from a Brexit but the world's fifth largest economy would go on. The prospect of a Leave vote would have been very different for Ireland
The UK could afford to leave the EU. It would take an economic hit from a Brexit but the world's fifth largest economy would go on. The prospect of a Leave vote would have been very different for Ireland

Irish business will breathe a collective sigh of relief this morning if indeed the final YouGov poll of the UK Brexit referendum turns out to be correct and a Remain vote shades it.

The UK could afford to leave the EU. It would take an economic hit from a Brexit but the world's fifth largest economy would go on. The prospect of a Leave vote would have been very different for Ireland.

Uncertainty around the value of sterling, a tariff regime and border controls would all have taken their toll. However, a Remain vote this time round does not put Ireland in the clear either.

The last UK referendum on EU membership in 1975 never really settled the issue for the British, and this one is unlikely to either.

A Remain vote may be presented as backing the status quo as far as the EU is concerned, yet nothing could be further from the truth.

The UK referendum saga should be a wake-up call for the entire European project.

The vitriol of the debate has shown that the UK is a country divided on the issue of Europe, perhaps now more than ever. And it will remain that way.

The reaction of the senior figures of the EU has been most telling during the campaign. They have said on one hand that a Leave vote would signal the end of Britain's participation in the single European market. Yet on the other hand they have said the brakes need to be put on further European political integration even if it is a Remain vote.

The British political establishment has invested so much in what appears to be preserving the status quo, given that the Brexit issue has dominated government and political discourse for well over a year now.

A Leave vote would mean the foundation pillars of the EU have been cracked, if not shattered. A Remain victory after such a hard-fought campaign would show how vulnerable the building materials in those pillars actually are.

But even if the underlying vulnerabilities of the EU have been exposed for the long term, Irish businesses can take considerable comfort from a Remain vote in the short term.

There is genuine good news there. Falls in the value of sterling against the euro have weakened Irish exporters' competitive advantage. A renewed rise in the value of the British currency will follow a Remain victory and restore some of that advantage which had been lost in recent months.

Commitments on investment in the UK had begun to fall because of the uncertainty around a possible Brexit. This has reduced the appetite of British business to spend and buy, which has affected Irish exporters and large Irish companies with a strong presence in the UK.

Contingency plans in international markets which affected share prices and currency markets won't have to be enacted.

A Leave victory would see volatility in currency markets in the short term and a huge freeze in inward and domestic investment in UK business for at least two years until there is clarity on the nature of a British withdrawal from the EU.

Irish business would be caught directly in the crossfire of that uncertainty and likely economic downturn in the UK.

The fragility of the economic and political gains made on the island of Ireland has also been exposed by this referendum irrespective of the outcome. A Remain vote means we retain an open border and the free movement of people and goods between Derry and Donegal, Dundalk and Newry.

Certainly a Leave vote would bring some opportunities. The UK attracts over 40pc of all inward investment into the EU. Ireland would stand to gain a slice of that.

However, the more of that business we would win with our low corporate tax rate, the more it would alienate us from Berlin and Brussels, and potentially London too.

The EU's problems remain, regardless of the outcome. They are still there - lack of economic growth; large sovereign debt in Italy, Greece and Ireland; bureaucracy; failed migration policy; political alienation; laborious decision-making procedures; and a dysfunctional bond market.

A UK Remain vote will prevent a domino effect of EU countries heading for the exit. Given Ireland's dependence on the success of the EU story, that has to be good. But it doesn't solve Europe's problems.

Irish Independent

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