Wednesday 22 November 2017

Ailish O'Hora: We must temper Brexit hopes as spoils shared out

'While Ireland is front and centre in negotiations as far as the former EU Commissioner is concerned, he also warned against the
'While Ireland is front and centre in negotiations as far as the former EU Commissioner is concerned, he also warned against the "illusion" that Britain's exit from the EU would be easy after the talks kick off next month'. Stock photo: PA
Ailish O'Hora

Ailish O'Hora

I spent the first part of last week in Brussels, where Ireland's future in Europe will largely be decided over the coming years post-Brexit.

I left Ireland with EU chief negotiator Michel Barnier's warnings of the complexities of Brexit ringing in my ears.

While Ireland is front and centre in negotiations as far as the former EU Commissioner is concerned, he also warned against the "illusion" that Britain's exit from the EU would be easy after the talks kick off next month.

By the time I got back to Dublin, news had broken that banking giant JP Morgan had decided to locate part of its operations in the capital.

Not only that, the bank could also double its Dublin workforce to 1,000 people and acquire a building in Dublin's docklands in the post-Brexit move.

Others may follow with a slew of other financials currently deciding where they will live after they leave the UK following Brexit.

But while news of the jobs and the purchase of the property in the Irish capital is a welcome one, it got an awful lot of coverage.

In reality, it is small beer.

And in that context, the trip to Brussels was also a stark reminder of what a small part of the European jigsaw Ireland actually is. It also served as a reminder of how important it is for us to temper our expectations in terms of business fallout post-Brexit.

Don't get me wrong. That is not to say that we shouldn't be ambitious in our targets and be bold in our attempts to attract as much post-Brexit business as possible.

We definitely punch above our weight in Brussels, there's no doubt about that.

And Ireland has earned quite the reputation for being a strong and influential negotiator when it comes to touting for business.

But we are not, and will never be, Frankfurt, Paris or Barcelona.

Beyond the logistical problems of finding housing for the thousands of bankers and other workers we'd love to see come here, size actually matters.

So when it comes to debate about Ireland's chances of attracting big European body like the Medicines Agency and the Banking Authority, we need to be realistic.

Both are currently housed in London and Europe needs to find a new home for them post-Brexit.

Nearly every country in the EU has put its name forward as a natural home for either or both agencies, including Ireland, and they would be welcome with open arms in any jurisdiction.

But as one senior European official put it in Brussels last week, the chances of Ireland attracting either agency is virtually zero.

That is also partly because Europe tends to make decisions for political reasons.

For example, the European Medicines Agency, which employs about 900 people, is already at the centre of a plot by MEPs to move it to the not-so accessible French city of Strasbourg in exchange for an agreement that the European Parliament would meet in Brussels only in the future.

Currently, the European Parliament meets once a month in Strasbourg.

This is a pain for the MEPs and other European officials and also costs €114m a year in travel expenses. It seems like a logical solution but things are never that simple in Europe.

And it is not one that newly-elected French President Emanuel Macron is likely to accept - not even if the European Banking Authority were thrown into the mix as another sweetener for France.

Then there's the Luxembourg angle.

Luxembourg is already staking a legal claim to host the banking authority, citing European law dating back to 1965.

For what it's worth, Luxembourg has already beaten Dublin to secure the business of Blackstone, AIG and M&G post-Brexit.

The fight for the agencies continues but word on the street in Brussels is that the medicines agency is likely to go to the Spanish city of Barcelona while the banking authority's new home is likely to be a large city with a big banking tradition like Frankfurt.

Again, though, the agencies are only part of a bigger picture and the big Brexit battle will commence after the UK General Election on June 7.

One of the key planks of the negotiations will be the cost of the divorce proceedings for the UK for outstanding commitments.

While figures of up to £100bn have been mooted, and subsequently rejected by the UK, a more recent estimate by the Institute of Chartered Accountants in England and Wales put the low scenario at £5bn and a higher one at £30bn, taking account rebates owed to the UK into account.

The real figure is most likely to be €40bn to €60bn and given that the value of trade between the UK and the EU is €600bn a year, this seems pretty reasonable.

However, this is not a message that seems to have been delivered to the UK electorate - not surprising I suppose given the upcoming election across the pond.

A French farm leader wading in with his calls for a hard border during the week only goes to show how fragile and multi-faceted these negotiations are likely to be with 27 member states in the background.

His comments are not reflective of mainstream farming in France but more fears that a British cheap food policy would mean food from outside the EU entering the Single Market "through the back door" to the island of Ireland.

But the farmer should also be careful what he wishes for. A hard border would mean Irish farmers having to seek new markets for their beef and the French market would be an obvious choice!

The UK remaining in the Single Market, or failing that the Customs Union, is still the best outcome for Irish and UK citizens and businesses.

And one of the challenges for Ireland, not having a direct seat at the negotiation table, would be that the talk procedures stay on track and that our priorities are not pushed down the table.

It's going to be a long summer.

Sunday Indo Business

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