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Ireland 'open for business' despite shock of election

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Fine Gael leader Leo Varadkar. Photo: REUTERS/Lorraine O'Sullivan

Fine Gael leader Leo Varadkar. Photo: REUTERS/Lorraine O'Sullivan

REUTERS

Fine Gael leader Leo Varadkar. Photo: REUTERS/Lorraine O'Sullivan

With Sinn Féin's election breakthrough in focus, the outgoing Taoiseach and other top officials at a financial conference in Dublin rushed to reassure investors that Ireland remained open for business.

Financial and property shares have already been hit hard by the emergence of Sinn Féin, whose manifesto pledged to reduce tax breaks for banks that were bailed out by the State, and to introduce a raft of controls on the private rented sector, from price caps onwards.

While accepting that voters had rejected the policies of his Government, Leo Varadkar told the conference that "the political centre in Ireland has been shaken... but it has held".

Other officials noted that a change in Government would not be accompanied by a radical redrawing of the State's policies on winning the business of multinationals and other companies from overseas.

"All of the major parties are committed to foreign direct investment," Martin Shanahan, CEO of IDA Ireland, told the European Financial Forum.

Despite representing a sharp shift to the left in economic policy, Sinn Féin has said it will stick to the State's 12.5pc corporation tax rate, which has been key to attracting investments from a raft of companies - from big pharma to high-tech - to set up here.

The party has, however, said that it will impose higher taxes on transfers of intellectual property to Ireland, a move that it says would raise €722m, in what is its biggest budget revenue-raising measure.

It has also said it would drop the State's appeal against an EU ruling that Ireland gave Apple a sweetheart tax deal worth €14bn.

Multinational companies pay more than €7 in every €10 the State receives in corporation taxes, while foreign investors directly employ a quarter of a million workers.

The election is the latest risk to hit Ireland, which is the most exposed economy in the world to the damage from Brexit.

This, according to Central Bank of Ireland figures, could potentially lop €9bn off economic output by 2028 if the UK does not strike a trade deal with the European Union.

That risk has been amplified by the insistence of prime minister Boris Johnson that any deal must be struck this year, or London will trade with the EU on the same terms that it trades with the rest of the world.

"The UK has set a tight, maybe somewhat unrealistic, timeline for those negotiations," Mr Shanahan said.

The outgoing Minister of State for Financial Services, Michael D'Arcy, chose to stress Ireland's post-Brexit attractions to international investors, including financial services.

"We are the only English-speaking, common law country in the EU," he said.

However, Mr D'Arcy conceded that "there will be a reset" from the Fine Gael administration that has ruled since 2011. "It is a matter for the new Government to put in place a new strategy," he said.

But he too stressed there would be continuity in the overall attitude to attracting investment.

"There will be no change in commitment to foreign direct investment companies," he said.

Central Bank governor Gabriel Makhlouf, who was appointed by the outgoing Fine Gael Government in controversial circumstances that drew criticism from Sinn Féin, warned that the Irish economy also faced risks from coronavirus thanks to trade links with China.

While he noted that "growth has been strong", he also said that the State "should not be complacent".

"Any impact on the Irish economy would be felt through both direct and indirect channels," he said.

"From a decline in demand for Irish exports to China, to the negative impact on overall world demand and a consequential impact on Irish exports. As China accounts for a large and growing share of world output - about 19pc of world GDP in 2018 - we would expect a disruption to China's economy to have an impact on Ireland," the governor added.

Research from the Central Bank issued yesterday noted that a large portion of the export growth experienced by the State last year was down to sales of computer components to China.

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