Sir Michael Rake: UK would lose its clout outside union
Published 22/05/2016 | 02:30
In one month, the future direction of the UK economy will shift to voters as the country decides on whether to stay in or leave the European Union.
While the leave camp insists there is little to worry about, businesses in the UK, Ireland and elsewhere are trying to weigh up the potential risks. Surveys show this is a roll of the dice few business leaders would consider taking.
The economic fallout of a Brexit on both countries cannot, in my view, be overestimated. A few figures. With more than €1.2bn of bilateral trade every week and strong ties in sectors such as food and drink, financial services and energy, ING Bank has predicted a 1.1pc fall in Irish Gross Domestic Product by the end of 2017.
AXA has predicted anything from 2 to 7pc falls in UK GDP. The Economic and Social Research Institute (ESRI) predicts trade flows between the UK and Ireland could fall by as much as 20pc. The mechanics of exporting and moving people around could become more difficult.
The UK is Ireland's largest export market, with goods and services exports at €30bn in 2014 - 17pc of total Irish exports. The UK ranks as Ireland's biggest market for services exports and second for goods exports at €16.5bn and €13.4bn respectively in 2014. These are big numbers and big issues.
Ireland recently regained an A-grade credit rating. It shows confidence in the direction of the economy. Yet Fitch, a credit rating agency, says Ireland is one of the most exposed markets in the EU to the UK "via merchandise and service exports". Any disruption in the financial markets, in Foreign Direct Investment flows such as in the ICT sector and a potentially weakened UK economy through Brexit, would have a substantial knock-on effect on the Republic of Ireland.
A vote to remain would likely have a positive impact on business confidence.
Joining the EU was one of the most significant steps the UK and Ireland have taken. The economic benefits of the UK's membership are huge, through international trade deals, through access to a single market (including digital) of 500 million people, through FDI and through movement of people. Some 45pc of UK exports are to the EU, which supports 3 million UK jobs. If Britain left the single market, it could face the common external tariff, which - given that 40pc of our exports to the EU are in high-tariff industries such as cars, chemicals and food - would have a detrimental impact on businesses and households. Many investors from Japan, China, USA and India chose our nations as a runway to the EU.
Outside the EU, the UK would be advocating its interests against those of 27: a nation of 65 million people with 2pc of global GDP dealing with a bloc of over 400 million with 16pc. As someone used to negotiating business deals, this does not seem like a strong hand.
There has been no credible articulation by the leave camp of how businesses can retain, let alone improve upon, the benefits we currently get from the EU by walking away. Indeed, my preference would be to stay and drive reform in the EU services, digital and energy markets. We should strengthen not weaken the EU's hand in seeking international trade deals.
Some have pointed to the 250,000 British citizens in the Republic eligible to vote. Estimates suggest the 'Irish-linked' cohort among the voting public in Ireland and the UK at more than three-quarters of a million.
With profound potential business and trade impacts for Ireland, every eligible citizen should spare time to think hard about their vote on whether the UK should remain in the EU. As someone with both Irish and British ancestry, I do hope everyone pauses for reflection before June 23, 2016.
Sir Michael Rake is chairman of BT Group
Sunday Indo Business