Monday 20 November 2017

Brexit could mean 'marked slowdown' in Irish economy - Deutsche Bank warns

Shoppers on Grafton Street in Dublin. (Stock photo)
Shoppers on Grafton Street in Dublin. (Stock photo)
Colm Kelpie

Colm Kelpie

Deutsche Bank has cast doubts on the ability of Ireland to win increased foreign direct investment in the wake of Brexit.

The global finance house also warned of a “marked slowdown” in Irish economic growth.

Deutsche said Dublin’s capacity to take advantage of the dislocation from London of financial services firms has “limits”.

In a note to investors, Deutsche’s chief economist Mark Wall said that if the common travel area between Ireland and the UK can be retained, then Ireland will be an appealing destination for firms relocating elements of their business from London.

But infrastructural gaps could hinder Dublin’s ability to benefit, Deutsche suggests.

“Dublin’s capacity to take significant advantage of the dislocation of financial services from London has limits, in our view,” the bank said.

“A decision to relocate will depend on a range of factors. Commercially, the fit requires a range of other business services being available, from sufficiently well developed global accounting, tax, legal and business services industries.

“Non-commercially, it depends on factors such as availability of housing, school places, etc. Dublin’s non-commercial capacity and infrastructure is suffering from under-investment after the financial crisis.”

Deutsche said the Irish economy is exposed to a Brexit through various channels.

“About 40pc of exports from indigenous Irish firms go to the UK,” the bank said.

“These firms are responsible for over 85pc of employment.”

There could also be an impact on the housing market, Deutsche said, with higher uncertainty and tighter conditions likely to weaken housing demand.

“There are analysts predicting outright recession in the UK. Ireland is exposed to these risks,” Deutsche said.

“We expect Irish GDP growth to slow from 5pc this year to 2.9pc in 2017. This is a marked slowdown.”

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