Sunday 9 December 2018

Irish slower to cut UK links than EU peers since leave vote

IMF managing director Christine Lagarde speaks at the Central Bank of Ireland and IMF Economic Review conference ‘The Euro at 20’ in Dublin yesterday. She warned that more Eurozone integration is needed to protect the bloc. Photo: Conor McCabe Photography
IMF managing director Christine Lagarde speaks at the Central Bank of Ireland and IMF Economic Review conference ‘The Euro at 20’ in Dublin yesterday. She warned that more Eurozone integration is needed to protect the bloc. Photo: Conor McCabe Photography
Donal O'Donovan

Donal O'Donovan

Irish businesses have been dramatically slower than their peers to cut financial ties to the UK since the Brexit vote, according to new research from six European markets including France and Germany.

Nearly half of 800 executives surveyed across the six EU countries said their businesses had reduced investment in the UK since the Brexit vote. The survey included 150 executives in Ireland.

Here, 29pc said their business had reduced trade or operations in the UK since the vote and 35pc of Irish respondents have reduced investment in the UK as result of Brexit, versus 46pc overall.

The research, commissioned by law firm Baker McKenzie, suggests Irish business may be finding it harder to shift operations from the UK - historically and geographically our closest market for imports and exports - than continental peers.

The overall figures highlight the impact the June 2016 vote has already had, ahead of the March 2019 deadline for the UK to formally leave the EU.

"The clock continues ticking on a Brexit deal and, without any clarity as to its final shape, businesses in both the EU and UK are inevitably having to take matters into their own hands," said Ross Denton, a trade lawyer at Baker McKenzie. This could hurt "the UK economy in the long run if, as our survey suggests, EU27 businesses continue to rethink or pull the plug on their UK investments".

The survey results show executives are opposed to a punitive Brexit deal being imposed on the UK - 75pc said the EU should make concessions to the UK to secure a better trade deal for their businesses.

However, more than a third also wanted to see Britain punished.

Surprisingly, Irish businesses took a harder line, with only 67pc backing concessions for the UK.

Like their peers, Irish executives regard a free trade deal between the UK and EU as more important than a customs union. The surveyed executives are at businesses in France, Germany, Spain, the Netherlands, Sweden and Ireland.

All work at companies with at least £250m in sales.

The results published yesterday came as the head of the International Monetary Fund (IMF) Christine Lagarde said in Dublin yesterday that Brexit will trigger an "influx of financial firms that will move to continental Europe - and Ireland".

She was speaking at an event organised jointly by the Central Bank and the IMF to mark '20 years of the Euro'.

Ms Lagarde warned that regulatory and supervisory capacity in the remaining EU will need to be bulked up in preparation for the arrival of financial firms from London.

At the event, she stressed the need for further euro area integration, including completion of a so-called banking union, a capital markets union better able to finance industry, and a European rainy day fund capable of sustaining the single currency through any new crisis.

"We meet at a moment when the EU and euro area are in the midst of difficult decisions about their future," the IMF managing director said.

"Populist movements - from Brexit to the recent Italian elections - have called into question the value of European integration."

But, she said, such steps were needed to make the Eurozone more resilient.

"The euro area needs truly integrated financial and capital markets that allow companies to raise financing across borders more easily and support investment."

Irish Independent

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