Business Brexit

Sunday 25 September 2016

Richard Curran: Irish business will breathe a sigh of relief if Brexit opinion poll is correct

Published 23/06/2016 | 23:18

Workers begin counting ballots after polling stations closed in the Referendum on the European Union in Islington, London, Britain, June 23, 2016. REUTERS/Neil Hall
Workers begin counting ballots after polling stations closed in the Referendum on the European Union in Islington, London, Britain, June 23, 2016. REUTERS/Neil Hall

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

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At the time of writing the YouGov poll for Sky News had shown a 52pc vote for Remain and UKIP leader Nigel Farage had admitted that Remain looks like it will edge it.

Workers begin counting ballots after polling stations closed in the Referendum on the European Union in Islington, London, Britain, June 23, 2016. REUTERS/Neil Hall
Workers begin counting ballots after polling stations closed in the Referendum on the European Union in Islington, London, Britain, June 23, 2016. REUTERS/Neil Hall

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.

Workers begin counting ballots after polling stations closed in the Referendum on the European Union in Islington, London, Britain, June 23, 2016. REUTERS/Neil Hall
Workers begin counting ballots after polling stations closed in the Referendum on the European Union in Islington, London, Britain, June 23, 2016. REUTERS/Neil Hall

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.

EU leaders in Brussels will panic if the Leave camp pull it off in the end. A Remain victory will signal some relief. But 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.

Ballots from the City of Westminster and City of London are counted at the Lindley Hall, Royal Horticultural Halls, London, as counting gets underway in the referendum on the UK's membership of the European Union. Anthony Devlin/PA Wire
Ballots from the City of Westminster and City of London are counted at the Lindley Hall, Royal Horticultural Halls, London, as counting gets underway in the referendum on the UK's membership of the European Union. Anthony Devlin/PA Wire

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 means the foundation pillars of the EU have been cracked, if not shattered. A Remain victory after such a hard fought campaign has shown how vulnerable the building materials in those pillars actually are.

Workers begin counting ballots after polling stations closed in the Referendum on the European Union in Glasgow, Scotland, Britain, June 23, 2016. REUTERS/Clodagh Kilcoyne
Workers begin counting ballots after polling stations closed in the Referendum on the European Union in Glasgow, Scotland, Britain, June 23, 2016. REUTERS/Clodagh Kilcoyne

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 will 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 massively 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.

But the stance of the largest political party in the North, the DUP, tells a lot about where it sees the future of the region and the relative unimportance of maximising the potential of an all-island economy.

A Remain vote might consolidate what has been achieved between Ireland North and South, but the campaign has shown just much the journey of greater economic integration on the island still has to travel.

A Leave vote is just the beginning of a long tortuous series of negotiations between Dublin, London, Belfast and Brussels about the future of the border with the North. 

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.

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