Saturday 18 November 2017

'I'd be absolutely devastated if any of these firms left' - business owner on Trump threat

Technical details: Alan Austin and Gary Browne, who are proprietors of Grand Barbers at Altro Vitro on the Grand Canal Dock, Dublin. Photo: Steve Humphreys
Technical details: Alan Austin and Gary Browne, who are proprietors of Grand Barbers at Altro Vitro on the Grand Canal Dock, Dublin. Photo: Steve Humphreys
Google in Dublin at the Grand Canal. Photo: Steve Humphreys

In the swish cafes and shops around Dublin's Silicon Docks there has been a flurry of anxiety.

From the vast Intel chip plant and Hewlett Packard factory at Leixlip in Kildare, to the pharmaceutical hub around Cork, there is a mood of uncertainty about what might happen in the new era of Donald Trump.

We have hardly had time to take in the economic trauma of Brexit. Now we have Donald Trump's equally unexpected victory in the US presidential election.

During the US campaign, Irish observers may have found Trump's malevolent banter about "crooked Hillary" and his outrageous coiffure compelling, but The Donald phenomenon did not seem to have much to do with us.

Google in Dublin at the Grand Canal. Photo: Steve Humphreys
Google in Dublin at the Grand Canal. Photo: Steve Humphreys

His victory seemed so unlikely that few took time to study his policies, including his plan to lure US multinationals back home from Ireland by dropping the corporate tax rate from 35pc to 15pc.

Now, if some predictions prove correct, that could become a reality. The American Chamber of Commerce in Ireland, which represents the companies involved, was quick to offer reassurances that we are not about to suffer a mass 'Trexit' of companies.

To Mark Redmond, chief executive of the chamber, Ireland's attractions to US are not all about tax.

"US business leaders in Ireland view talent as the main reason why companies invest here," he said this week. There is a lot at stake for Ireland, as US multinationals currently employ 140,000 people.

In areas dominated by these American corporate behemoths, it is not just the employees themselves who are utterly dependent on the US paymasters. It is also the vast network of linked companies and small businesses around them.

Read more: Bannon is 'most dangerous political operative in the US'

As well as employing 4,500 in Leixlip, Intel has depended on 756 Irish suppliers since it opened in 1989. The company supplies computers to local schools and offers scholarships. It subsidises sports clubs and the local Tidy Towns group.

Apple employs 4,000 people in Cork, mostly at its Holyhill plant, but it is estimated that a further 2,500 people depend on the tech giant for their livelihood - from the makers of components, to builders working on the plants, to the fishmonger Pat O'Connell from the city's English Market who supplies the canteen.

Around Dublin's Silicon Docks this week, there was understandable consternation at any suggestion that big US multinationals would be tempted to move.

A whole economy of coffee shops, restaurants and swanky apartments has grown up around the hi-tech cluster that includes Google, Facebook, Linkedin and many other companies.

In his thriving barbershop on Grand Canal Dock, Alan Austin says he's concerned by the latest developments, and Trump's promise to cut taxes in the US.

"I would be absolutely devastated if any of these companies moved," says the Austin, who welcomes hundreds of the casually-attired employees from the nearby tech companies.

He opened his first barbershop just as the economy was about to crash in 2008, but he couldn't have picked a better place.

While businesses elsewhere went belly up, and property prices collapsed, Google continued to grow and with other companies eventually arriving, Silicon Docks was dubbed the most potent symbol of Ireland's economic recovery.

We may complain about their low taxes, but Austin believes the multinationals kept businesses ticking over during the recession.

Alan McQuaid, economist with Merrion Capital, agrees.

"I would say that during the financial crisis that without the multinationals, the Irish economy would have been well and truly knackered," he says.

But now the doomsayers warn that if Trump and his acolytes do what they say they want to do, it could be the biggest threat to Irish prosperity since the crash - and its effects could be deeper and more long-term.

Read more: Do you have TDS? (Trump Derangement Syndrome)

There were alarm bells in recent days when one of Trump's top economic advisors, Stephen Moore, issued a stark warning after the election.

The man who helped devise Trump's economic policies warned that a "flood of companies" will leave Ireland under the President-elect's planned new tax regime.

The news comes after Brexit, which has already led to the collapse of some Irish businesses, and seen a flood of shoppers crossing the Border to snap up bargains.

Trump himself has described his successful movement as "Brexit Plus, Plus, Plus".

Would the multinational jobs really be under threat if Trump succeeds in pushing through his measures?

If we want to read the tea leaves and predict our economic future, we should perhaps ignore the humdrum goings-on in the Dáil.

Instead, we should watch the real -life House of Cards drama playing out in New York and Washington, as right-wingers jostle for position in the US government.

The wrangling was described as a "knife fight" by CNN as different factions fought for positions.

Part of Ireland's future may rest on which faction wins out, and whether they wish to go along with the massive corporate tax cut.

According to some estimates, it could cost the US government up to $9 trillion over the next decade to implement it.

"It is not clear what Trump will be able to do, because he is just the president, and at the end of the day he still has to get things passed through Congress. Obama also made noises about changing corporation tax, but nothing much came of it because it was blocked," says Dr Edgar Morgenroth, economist at the Economic and Social Research Institute (ESRI).

Dr Morgenroth believes that even if the US corporate tax is lowered to 15pc, it is unlikely to have a dramatic effect in the short term.

Massive corporations have spent billions opening factories and office complexes in Ireland in recent years

"If you have spent a lot of money on a new headquarters and hired staff and everything is going okay, you're not just going to suddenly say 'We're out of here'."

The economist says changes to corporate tax rates may have an effect in the long term, however.

While Google and Apple might stay, some economists believe there will be less incentive for US companies to move their operation over here.

Dr Morgenroth says the negative effect of the Trump phenomenon is that it has increased uncertainty in Ireland.

"Uncertainty is a bad thing, because people can't make decisions on investment if they don't know what is going to happen."

He says Ireland now finds itself in an uncomfortable place, with the difficulties caused by Brexit, and pressures from the European Commission to change our system of corporation tax, combining with the Trump phenomenon.

As one commentator joked this week: "Ireland is in a difficult position. There's Trump to the left us, Brexit to the right. We're stuck in the middle with the EU."

The future of new investment by American companies in Ireland may be uncertain as a result of the Trump measures, but companies such as Intel are deeply embedded.

Leixlip county councillor Joe Neville was still a child when the plant was being built, and remembers being impressed by the spacesuit-like gear worn by the staff in the "clean rooms".

"People of my generation grew up with it and four out of my 10 best friends work there. Both Intel and Hewlett Packard are very community oriented."

Neville has seen for decades the effect of Intel on the economy in the area and says that hundreds of local people, apart from the employees, depend on the factory for their livelihood.

"There are many people who work as contractors doing cleaning, landscaping and construction.

"It is impossible to forecast what he will do.

"Personally, I wasn't all that concerned when Trump won, because we have heard of proposals to cut the corporate-tax rate in America before, and it has never happened.

"Obama talked of doing it and no doubt it could have been part of Hillary's agenda as well," Neville says of Trump's corporate-tax plans.

Read more: 'Two Trump supporters asked me if I was legal... now I engage less with customers'

In the short term, economists seem to be more concerned about the effects of Brexit than Trump's political soap opera. As well as trying to predict what might happen in Washington, they are observing what is happening in Number 10 Downing Street as the British Government tries to implement Brexit.

A leaked memo prepared by the consultants Deloitte painted a picture of chaos at the heart of the British government, with splits between ministers and the civil service struggling to cope.

"It is clear that they don't have a plan in London, and I don't know why anyone is even talking to them," Dr Morgenorth of the ESRI says.

The economist predicts that there will be a "hard Brexit", which would mean much tighter restrictions on movement and trade between the UK and EU countries.

So far, there has been little sign of a resolution to the question of what would happen to the Border between North and South.

One notion that has been floated is the idea that Britain is seeking to shift the frontline of immigration controls to Ireland's ports and airports to avoid having to introduce a "hard border".

But Dr Morgenroth describes this idea as "utter and total nonsense".

He says it is quite possible that Britain will leave the customs union, the free trade area in the EU, and in that case there would have to be Border controls.

The collapse of sterling in anticipation of Brexit has already hit Irish businesses, particularly in the food sector, as Irish exports to Britain have become less competitive.

Up to five mushroom producers have gone out of business since Brexit.

But even when Britain leaves the EU, and if Trump lowers corporation taxes, there may still be a silver lining for Ireland, according to economist McQuaid.

"Ireland will be the gateway to Europe for US companies, and it will help us that we are the only English-speaking country in the EU."

McQuaid says a 15pc corporate tax rate may be hard to implement in America. He points to differing opinions in the Republican party, with some influential figures advocating a 24pc rate. It is possible that a compromise will be reached with a figure of 20pc, but this is likely to be phased in over a long period.

"We can't take things for granted, but this is not the end of the world by any means," McQuaid says.

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