Monday 16 September 2019

Richard Curran: 'Forget Boris - real border talks are between Dublin and Brussels'

British PM Boris Johnson. Photo: Getty
British PM Boris Johnson. Photo: Getty
Richard Curran

Richard Curran

The politics of 'the deal' are everywhere right now. Donald Trump is pursuing foreign policy interests by treating everything as a deal. He bluffs; postures to go so far with the likes of China on trade or Mexico and Canada on the North American Free Trade Agreement. When he feels he has got something, however small, he backs down and does a deal, saying he won.

It is an approach borrowed from the corporate world and is built on the false premise that every deal is about winning. It isn't true in business or in politics.

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Boris Johnson is doing something similar with Brexit. He may not be bluffing about whether he is prepared to take the UK out of the EU without a deal. Either way, he sees Brexit in terms of winning.

Speaking after German chancellor Angela Merkel put the bluff right back in his own court, Johnson said he welcomed the 30-day "blistering" deadline she had set him to come up with an alternative to the backstop.

He went on to say: "What in my experience happens is that people find a way through and I think that if we approach this with sufficient patience and optimism, as I say, we can get this done, and it is in the final furlong generally when the horses change places and the winning deal appears."

There are no winners in this sorry Tory mess. The reality behind Merkel's 30-day deadline is quite different. The backstop was due to come into effect after a UK transition period, following its withdrawal from the EU. The UK's future relationship with the EU would be hammered out during that transition and if the outcome meant a trade border would still be required on the island of Ireland, the backstop would kick in.

Merkel is saying to Johnson that he must come up with a solution and he should do it in 30 days, instead of two years.

It would be a very long stretch for the EU to go from describing previous British border proposals as "magical thinking" to suddenly accepting the same reheats.

The future negotiations around avoiding the backstop were all about the UK's future trading relationship with the EU.

One way to avoid the backstop would be to opt for a softer Brexit - remain in the customs union or the single market. Johnson has ruled this out.

It seems Merkel and French president Emmanuel Macron are putting Johnson's own bluff back on him by shifting any blame for a no-deal Brexit away from Paris, Berlin and Brussels, and back to London.

Meanwhile, talks continue between the Irish Government and Brussels about what level of infrastructure, checks and controls the EU might be willing to accept as a minimum requirement to ensure an open border in the event of a no-deal Brexit.

How can Dublin satisfy the EU it can maintain the integrity of the single market with a minimum presence along the border? It won't be easy.

Systems around customs checks at factories and ports etc are all well and good, especially for larger businesses. But the system has to be checked to make sure it is working.

Similarly, a light-touch approach to border checks will simply bring back smuggling in a massive way.

At some point, there have to be physical checks along the border - even if they are only random and sporadic.

Johnson cuts a desperate figure clutching at straws by seizing on Merkel's comments about finding a solution within 30 days.

CRH decides to throw more share buybacks in the mixer

It is hard to find fault with the first-half performance of building materials giant CRH, which delivered record results during the week. Earnings were up a staggering 36pc to €1.5bn. The group's strategy of disposing of businesses and becoming more streamlined has helped with trading performance and margin. It even managed to cull its interest and tax bill during the half.

The American road-building programme continues. CRH has hiked up cement prices in many of its European markets. In fact, Ireland and Poland saw volume and price increases above 5pc.

CRH chief executive Albert Manifold summed it up to Reuters when he said the group had become a "cash machine", having generated €11bn of free cashflow in the past five years.

There are a few interesting figures worth putting into the mixer. Around 80pc of the profits come from North America and eastern Europe. Even wobbly Brexit Britain only accounts for around 7pc.

CRH has agreed divestments of €2bn so far this year, but has spent around €500m on acquisitions. It made a profit of €115m on its first-half disposals.

When you take the results on a like-for-like basis, the earnings growth was 5pc. It is still a solid figure.

The share price dipped on results day because the market was down and a lot of the good news was already priced in, as CRH shares have climbed by around 28pc so far this year.

CRH also announced a further €350m in a new share buyback round. This will bring its share buybacks to around €1.7bn in a little over two years.

Share buybacks have become a huge element of US corporate life. Last year, American corporations bought around $1trn of their own shares.

Despite CRH's stellar trading performance, where would its share price be without the buybacks?

It isn't nearly as big into them as Ryanair, which has bought back €3.1bn of its own stock since 2016. That is 36pc of its current market cap. No wonder it is facing strikes, having handed so much cash back to shareholders while now saying that up to 1,500 jobs are under threat.

Share buybacks are an excellent mechanism for rewarding shareholders. But they aren't necessarily good for anyone else. They restrict investment, aren't necessarily good for employees, and channel financial benefits of giant corporations into the hands of relatively few.

For example, US tax cuts, which will contribute to a $1trn exchequer deficit this year, boost corporate profits, which instead of being reinvested are used to fund share buybacks.

CRH says it is still an opportunistic buyer. Perhaps there just aren't enough opportunities out there right now.

Rural broadband plan is hanging on by a thread

Time is running out for the National Broadband Plan (NBP). The plan to deliver fibre broadband to half a million rural homes and small towns had another setback when an Oireachtas committee recommended that the network be held in State hands and not be privately owned.

It is far too late for an intervention of this kind. The licence has not yet been signed, but surely if there is only one bidder in the process, how many bidders will emerge if the funding model is made less attractive?

It was always a strange logic in the process that said ownership of the network should revert to the private operator, especially where the taxpayer is funding so much of the cost.

The rationale given was that it would better incentivise the operator to maintain, invest in, and take care of the network. Can the State not do this?

Yet it doesn't matter now. Changing this key provision around ownership of the network would fundamentally alter the entire financial premise on which the plan is built.

It sounds perfectly reasonable that it should remain in State hands, but this project is, in essence, now hanging on by a thread.

A fundamental change of tack now will probably kill it off altogether. The Government definitely will not jeopardise the project this side of a general election.

The NBP will proceed. The question is whether it will ever actually complete.

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