Saturday 25 May 2019

Despite Brexit, we must keep alive the friendly ties binding us to Britain

Brexit graphic
Brexit graphic
John McGrane

John McGrane

It almost feels as if nothing has changed since the UK referendum on EU membership. You can't (yet) hear the job losses or see the disinvestment. But all is far from well. In the weeks since the referendum, the pound has collapsed, UK property values have declined, new investment and recruitment have stopped, farming has no certainty of EU funding and UK universities are losing core research funding and talent.

Brexit means Brexit, but what does Brexit mean? Whether the solution is to be the Norwegian, Canadian or any other model, it seems certain that the context for Britain's negotiations with the other 27 EU member states is about to change from calm to seriously troubled. Job losses, business disinvestment and the resultant pressure on politicians will change the phoney war to real pain for the most vulnerable.

And in Northern Ireland, which costs Britain more to subsidise annually than the UK's cost of being a member of the Single Market, it seems the opportunity to prosper from economic advantage has been squandered.

Instead of benefiting from reducing business and travel taxes, the North's latest competitiveness metrics show it has plenty of real challenges apart from its border.

And all for what? If the referendum was about migration, the truth is the UK clearly needs employees from the EU. The clothing industry, for instance, relies on eastern EU seamstresses working in England just as much as on talented young British designers and Italian fabric makers.

The car industry, food, finance and construction all clearly rely on "foreign" EU workers and access to a market over eight times bigger than the UK itself (plus access to global markets via the EU's trade agreements).

Nothing exists today without interconnection to other markets. Even the iconically "British" Bentley starts its life in Bratislava, gets a German engine, is finished in England with chrome trim made in Westmeath and is sold to customers all over the world using finance assembled in Dublin's International Financial Services Centre.

Indeed, the British motor industry exports 80pc of its cars, mostly to the EU. It needs thousands of EU workers to operate and it imports 40pc of its raw materials from the EU. Barriers to workers or tariffs on both its raw materials and its exports will inevitably cause widespread job destruction.

In reality every EU country has legitimate rules to control its "free" movement. So, given the waste, pain and loss by delaying, shouldn't we end the phoney war and move at speed to agree, as we inevitably will?

In Ireland, whose "skin in the game" was rightly declared and acknowledged from the very start of all of this, we need to do just three clear things:

1 Protect Ireland, recognising that a bad outcome for the UK would also be a bad outcome for Ireland

Irish exporters are painfully challenged by a 20pc fall in sterling (let alone the potential demise of some of their UK customers). In the recent survey by the British Irish Chamber of Commerce which assessed the distinct reactions of both exporters and importers, it was encouraging to see that some Irish exporters are already investing in new markets.

However, those same exporters will tell you this is slow, expensive, difficult and less valuable than their UK business.

The same survey highlighted that business is inherently pragmatic and resilient but what it needs is early clarity of market rules and joined-up collective planning to make the best of them.

Protecting Ireland means competitiveness, consistent with fair terms for good jobs and investment. As well as new markets, there is scope to work even more with UK suppliers and customers, including helping Irish businesses to establish inside the UK as well as exporting from Ireland, to get the maximum amount of work from a still very substantial UK market.

And in tourism, a key service export accounting for one in eight Dublin jobs and hundreds of thousands more in local communities across the island, we can work even more closely together to offset currency weakness with strengthened joint offerings.

Protecting Ireland will also mean helping UK enterprises to do more business in Ireland by setting up here in the market which is nearest to their original base and guaranteed to deliver EU presence. It's about offering solutions to UK businesses exposed to loss from Brexit and about offsetting at least some of Ireland's substantial risk of loss too.

Of course, most of our indigenous firms don't export at all. Our importers, on the other hand, are everywhere. The main reason why the UK is Ireland's largest two-way trading partner is our import-dependency on the UK which supplies over a third of what Ireland doesn't create itself.

That's everything from clothing (typically sourced or re-processed in the UK by skilled employees from the EU), through groceries (often with ingredients made in Ireland), to machinery (maybe including world class hydraulic cylinders made in Carlow), to construction services (often run by Irish engineers) and all of them from UK companies typically using Irish-originated software systems to run their own businesses. So not only do Ireland's exporters face potential challenges but so too will the importers who underpin so much of the Irish economy. The benefit to importers of weaker Sterling will not be enough to offset raised barriers and the near-term damage to the overall economies of both islands.

So we have danger for both exporters and importers who now need a set of relationships between the UK and the EU and between Ireland and the UK which recognise and address Ireland's unique exposure to Brexit.

2 Fix the EU, for good

If we didn't have the EU we'd have to invent it. We need it for trade, to create more jobs than we can on our own by doing business across the EU as easily as we do at home. But we do need to ask why EU-based employers have to certify the same product in 28 different EU countries when they only do it once in the US. We should address why some EU countries invent local barriers to keep out imports from fellow member states.

The EU has been too slow about completing a globally-competitive single market for everything. And the EU still hasn't marketed itself to its own citizens or highlighted that it's "thanks to the EU" that we are delivering action together on climate, cleaner water, safer workplaces, equal pay for women, easier air access and the right for our children to study and to get a job anywhere in Europe.

The aborted commitment by the EU to a better environment for job creation needs to come back onto the table, now. The EU needs to play its part in fixing broken politics, broken markets and broken society - and not just in Britain - or, like climate, we may be the first generation to be able to fix these things or the last to be given the chance.

Empathy with the EU - and the US - does not mean antipathy to the UK or vice versa. Ireland uniquely has to manage not only its EU commitment but also its natural ties and very substantial shared interests with the UK. We have the ability, and the need, to be great at both.

3 Work Together

It was never more important for us to work together. The recent "Greater Dublin's Never Been Greater" initiative by Dublin's Lord Mayor to include all in the region in a collective pitch for investment, employment and growth is the right response to the challenge. We can't magic-away a collapse in sterling's value but we can work smarter together in response to it.

The Government's appointment of John Callinan to lead Ireland's Brexit strategy also strengthens an already experienced team and will deliver the War Committee to protect Irish interests in the multi-partner negotiation battles ahead.

It's too early to rely on acknowledgement of Ireland's special circumstances from some in the EU but it proves the importance of early diplomatic effort.

EU rules are merely political rules so we need to support our politicians and public servants to achieve rules that are right for Ireland, as every other Member State will fight for their own interests too.

Independent of EU/UK negotiations, an early renewal of the 2012 declaration of business co-operation between the UK and Irish governments will be the right next step. That 2012 accord paved the way for joint marketing of UK/Irish tourism, aviation finance and healthcare.

There's plenty of scope for more co-operation, starting with immediate renewal of the joint Visa Waiver and British Irish Visa Schemes.

Strong UK/Ireland structures will be needed to manage distinct UK/Ireland issues and opportunities, with good connectivity between the public and private sectors. Above all, we should clearly reaffirm the genuine trust and mutual regard which has characterised the contemporary relationship between the peoples of the United Kingdom and Ireland.

John McGrane is director general of the British Irish Chamber of Commerce

John McGrane


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