Friday 28 October 2016

Brexit toll: Breaking up is hard to do

It might be the old enemy, but when it comes to trade and jobs, Britain is our greatest friend. That's why June's Brexit referendum on our nearest neighbour's threatened EU exit matters so much to the Irish economy.

Published 28/02/2016 | 02:30

UK Prime Minister David Cameron
UK Prime Minister David Cameron
Ronnie Ritchie of Ritchie's Mints, the iconic Irish sweet brand. The company imports all its sugar from Britain. Photo: Tony Gavin.

To the beef farmer John Brennan, it would be a step back into the Dark Ages. He says he hates the prospect of reinstated customs posts and security checks near his home in Louth along the border.

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Nowadays, business people, shoppers and commuters take it for granted that they can move North and South - barely knowing which jurisdiction they are in.

But could they now face the possibility of a new heavily patrolled frontier, just as they did in the dark days of the Troubles? And will everything from cereals to sex toys coming in from Britain cost more?

When Boris Johnson put his bulky weight behind the campaign to bring Britain and Northern Ireland out of the European Union this week, he didn't just threaten to tear the British Conservative Party asunder.

He also cast a long shadow along our border with the North and placed a close trading relationship between Britain and Ireland in jeopardy.

A YouGov poll on Tuesday found that 51pc of voters in Britain want to leave. It has finally dawned on us that the possibility of Brexit is very real. Brexit has stoked up fears of price rises in Irish supermarkets, job losses, and rising tariffs. Most importantly, it has prompted fears that the hard-won stability of the six counties, and close North-South co-operation partly fostered in Brussels, could be threatened.

Yesterday's General Election may have attracted much more of our attention, but the referendum in June on whether Britain should leave the EU may have more profound long-term implications.

John McGrane, director of the British-Irish Chamber of Commerce, says there are 400,000 jobs that depend on trade between Britain and Ireland. This trade is worth over €1bn per week.

Half of these jobs are in the food industry and agri-business.

McGrane does not like to engage in scaremongering, but says the problem with Brexit is that we simply do not know what would happen. It is a leap in the dark.

"Nobody really knows what it would be like if Britain left. We have forgotten what it used to be like before we had freedom to move across the border without tariffs, customs posts and levies."

Ireland relies heavily on food imports from the UK, and it seems highly probable that food prices would increase if Britain decided to leave.

Dr Edgar Morgenroth of the ­Economic and Social Research Institute (ESRI) has studied the likely effects of Brexit.

He believes that in a worse-case scenario, trade between Britain and Ireland would be cut by 20pc.

"If Britain and the EU had to sign a trade agreement, products might be subject to tariffs - EU tariffs are on average 5pc to 6pc, and they are higher for food.

"If you have trade barriers, prices go up. Thirty percent of our merchandise comes from the UK."

A British exit could affect us in all sorts of unforeseen ways. Most of our gas comes from the UK and this is governed by EU rules.

Dr Morgenroth says that even if you don't have tariffs along a border, it can still add an average of 4pc to prices. This can be caused by delays at border posts and the bureaucratic requirements of customs checks and obeying trading regulations.

Among the most vocal opponents of Brexit is Jacqueline Gold, chief executive of the Ann Summers chain.

While other businesses have floundered on Dublin's O'Connell Street, her store selling lingerie and sex toys has flourished, and she has also opened shops in Cork and Belfast.

"A vote to leave would bring huge upheaval and a long period of uncertainty and risk for British businesses and this is what I find most concerning. We just do not know what's going to happen," the businesswoman tells Review.

Gold's Ann Summers chain sells two million Rampant Rabbit vibrators per year across Europe.

"Ireland is a really important part of our business, and our store on O'Connell Street is one of our top performing stores. We also have a very well-established party plan business in Ireland," she says.

"We were able to move into Ireland and grow our business there because of the EU and the many and varied trade agreements and regulations in place. It just does not make business sense to have to rewrite and renegotiate every single trade agreement with every single country."

Asked whether hikes in tariffs as a result of Brexit could lead to job losses in her Irish stores, she says: "We just don't know, and that for me is why we have to stay in the EU. The gamble of leaving is just too great."

The sense of worry is now even greater among some Irish business people, as they see the growing uncertainty over Brexit.

Ronnie Ritchie runs one of Ireland's oldest sweet makers in Dublin, Ritchie's Mints, an iconic Irish brand that has survived the corporate and political ravages of time. After the extremely short-sighted closure of Ireland's sugar industry, Ritchie has to import sugar for his sweets from Britain, bringing in 26-tonne loads by truck and ship. He also exports sweets to Northern Ireland and Scotland.

"Our biggest worry about the British leaving the EU would be our supply of sugar," he says.

"My worry is that it would be like going back to the 70s and 80s when you had all the worries about customs and excise."

Ritchie, whose family business was started in the 1930s, says the involvement of London Mayor Boris Johnson in the debate adds an element of uncertainty.

"When you throw Boris into the pot you really don't know what will happen," says the sweet maker. "It will be a case of suck it and see."

Dr Morgenroth of the ESRI believes Brexit would damage the British economy, and this in itself would be damaging to Ireland.

Multinational companies that previously found Britain attractive might be tempted to go elsewhere.

On the face of it, that might seem like good news for Ireland with multinationals choosing to move their operations here.

But if Britain sneezes, Ireland also catches a cold. According to the ESRI, less foreign direct investment in Britain would result in slower economic growth there, which would have negative impact on the Irish economy.

Dr Morgenroth says a 1pc cut in Gross Domestic Product in Britain would lead to a 0.3pc cut in GDP here.

The optimists and Brexit supporters argue that Britain and Ireland could simply sign agreements that would allow our special trading relationship to continue.

After all, before we joined the EU there was free movement of people between Britain and Ireland, with even fewer controls than there are now.

"In Ireland we might want to set up a free-trade agreement between Britain and Ireland, but it wouldn't be up to us decide. It would be up to the EU to negotiate it," says Dr Morgenroth.

In his declaration of support for Brexit, Boris Johnson optimistically declared that Britain could still form a close trading relationship with the European Union once it has decided to leave.

But this notion was ridiculed by the Prime Minister David Cameron in the House of Commons.

"I do not know any couple who have begun divorce proceedings in order to renew their wedding vows," Cameron quipped.

Of course, the change might not be as drastic as people along the border fear, and after a period of uncertainty, we may continue to have a free movement of goods and people across the border.

But Europe's migration crisis adds a new element of uncertainty to the prospect of Britain leaving.

Would Britain leave a porous border between North and South, when it could become a backdoor for migrants hoping to enter the UK? The pressure from public opinion might be too great to keep the border open.

The Irish Government may be reticent about campaigning on an issue to be voted on in a referendum by British voters, but it has made its reservations clear.

In a recent BBC interview, Ireland's Ambassador in London, Dan Mulhall, said: "When you have two countries that are linked in the way our countries are, with a land border between us and extraordinary economic, political, historical people-to-people links, anything that puts a barrier between them has to be a negative thing from our point of view."

Taoiseach Enda Kenny has gone further and warned that a Brexit could cause "serious difficulties" for Northern Ireland.

According to the British-Irish Chamber, there are now over 60,000 people who move across the border to work every day.

Anthony Soares, deputy director of the Centre for Cross Border Studies, says: "When you look at the economic movement between the two parts of this island - and the two islands in general - the EU has actually facilitated that.

"If the UK leaves the EU, and the types of projects and policies that encourage North-South cooperation are taken away, I would be worried that the two jurisdiction on this island would start drifting apart again.

"People in Scotland, England, Wales don't really have a sense of what it was like to see the border opening up (in the early 1990s), and what it was like before.

"I remember the feeling when the border opened up and all that military apparatus disappeared. There was a certain sense of freedom."

It could be that this sense of freedom that came with the opening up of the border helped to copper-fasten the peace process, easing the effects of Partition.

In seeking to leave the European Union, campaigners for Brexit in Britain and Northern Ireland may be playing with fire - and we do not know yet what the consequences would be if they succeeded.

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