Monday 25 September 2017

What does the UK vote mean for Ireland?

If the EU negotiators decide a harder Brexit suits them, it's now hard to see where the resistance will come from. Picture: Reuters
If the EU negotiators decide a harder Brexit suits them, it's now hard to see where the resistance will come from. Picture: Reuters

The big question is what the result means for Brexit. Bizarrely, from an Irish perspective, Brexit wasn't that big an issue during the UK campaign - although a massive turnout of younger voters in support of Labour was probably a knock-on affect from last year's vote.

Both Theresa May and Jeremy Corbyn opposed Brexit during the 2016 referendum, but have since said they'd implement it. There isn't clear water between the two on the core issue, and both lead political parties with divided views. The ascendency of the DUP, as a potential junior partner supporting a Mrs May-led government may be a game changer.

The DUP campaigned for Brexit - unlike Theresa May. But, its election manifesto calls for an absolutely minimalist approach to pulling out of the Union - including a "frictionless Border," maintenance of the common travel area and a free trade deal with the EU.

The DUP is British unionists, but the farmers and small business people that provide much of its core support know they'd be brutally exposed if a hard Brexit shut cross-Border trade with the Republic.

If the DUP tail wags the Tory dog then the issue of Ireland will be much more central to Westminster negotiators than it would be under either a Conservative or Labour majority government.

A DUP acting to cement the reality of all Ireland economic and social cohesion, by insisting on a soft Border, while Sinn Féin sits in the sidelines, would be one of history's great ironies.

So no hard Brexit, no hard border?

Unfortunately that is just one of a number of scenarios still on the table.

The Conservatives are divided and Mrs May's standing as leader has taken an unmerciful knock. She could go at any time, and a deal with the DUP with her.

Even if the Conservatives hobble a new administration together, whoever is sent to negotiate with Brussels will have to have one eye over their shoulder because they'll have no guarantee of backing in Westminster if and when things get tough. Those talks are due to start this month.

EU negotiators, officially led by Michel Barnier, but with Angela Merkel ultimately lurking behind the scenes, were always going to have the whip hand in the exit talks. That power imbalance has only become sharper as the UK sinks into self-inflicted political chaos.

If the EU negotiators decide a harder Brexit suits them, its now hard to see where the resistance will come from.

But Leo Varadkar said the election makes a hard Brexit less likely?

He said the election means there's no mandate for a hard Brexit, which may be true - a hung parliament in the UK means there isn't much of a mandate for anything.

But, he could have a point. The Westminster numbers thrown up by the election mean horsetrading is going to be the norm there, and with British voters apparently not that pushed either way about Brexit a pragmatism may start to replace the histrionics that got us all to this pass.

Is this going to hit the Irish economy?

Yes, for the worse. It is already hitting us. The pound fell as soon as the result became clear, that makes it harder for Irish exporters to compete in the UK markets, and less profitable for them when they do sell goods and services there.

British visitor numbers were already down before the latest fall in sterling. It is our biggest single market and that will get worse.

For Irish consumers and businesses, buying in the UK has become cheaper and online sales means that has never been easier.

For consumers the greatest savings are on big ticket items like cars and furniture. Domestic business will be hit by that, with a knock on for jobs and the public finances.

There's a wider issue. In less than a year the UK has become an economy that investors have to think about in terms of major political risks.

Its politics are unpredictable and its economy is going to suffer as a result. The main rating agencies all issued statements yesterday warning of the risks the new political questions pose on Britain, the world's fifth biggest economy.

Our economy is deeply integrated into the UK's, so we will suffer in tandem.

But aren't we getting all the great finance jobs from London?

The big spike in investment here by banks and insurers relocating here from London as a result of Brexit have so far failed to materialise. The UK election doesn't mean they are more or less likely to leave the UK, but Germany and the Benelux, not Ireland, seem to be the big winner when they do, regardless.

Irish Independent

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