While there may be long-term benefits and new opportunities arising from the UK's decision to...
411 days and counting…
Risks to Irish Economy post Brexit requires longer transition period and additional supports for Irish Businesses
15th February 2018 – Traditional economic sectors including agriculture and tourism will require post-Brexit financial support from both the EU and Irish state according to Mark Kennedy, Managing Partner at Mazars.
With 411 days to Brexit, Kennedy says that the failure of the UK and EU to reach any definitive agreements is leading to a state of uncertainty that could result in a slowing down of the Irish economy.
“It is impossible for any business to plan for Brexit, given the number of ‘known unknowns’ and the mixed messages coming from the British Government. Companies are investing huge amounts of time and resources scenario planning in a world where the goal posts are not yet in place. Unless we start to see firm agreements emerging we could see companies deferring investment decisions. Our advice to companies is that they cannot stand still and must assess the risks as best they can with the information available and make their investment decisions accordingly”.
According to Mr Kennedy, the biggest issue for Irish business is whether the EU and UK can come to some arrangement whereby the UK will remain in a customs union. “Certainly this looks like the most workable solution and Irish businesses will have to invest in the capacity to deal with more complex rules and potentially will find their business model changed as a consequence of tariffs and the administration of trade rules. Crucially though, the transition period will need to be extended to five years to allow this to happen in an orderly fashion. The current two-year proposal is just not sufficient for the significant adjustments required.”
Mr Kennedy, who was addressing the Institute of Directors in Ireland, called for structured support from the EU to achieve greater integration into EU markets by Irish businesses.
“Integrating Ireland’s trade with EU has not progressed really since the Global Financial Crisis. Ireland remains highly integrated with the UK and the majority of that trade is in traditional sectors – primarily agriculture and agriculture-related business, tourism and logistics.”
“This is where Brexit will hurt most. These traditional sectors remain very important to our economic success as they are a critical provider of employment in regional areas. Both Ireland and the EU need to financially support these businesses. We need to strengthen the focus on Government initiatives that support Irish businesses to build markets in Europe.”
Mr Kennedy also sounded a warning to Government on the need for Ireland to remain focused on providing a competitive taxation regime for business.
“One of the longer-term challenges for Ireland from Brexit will be the UK engaging in aggressive taxation policies in order to attract Foreign Direct Investment. We see the UK leading the way on implementing BEPs at a national level and we can reasonably expect it to adopt a lower corporation tax rate. Tax competition has been central to the UK's way of doing business for many years and has the potential to have a significant impact on Ireland and Irish business.”
Brexit Video Series
The exact consequences for future policy and regulation remain unknown. It will take time to...
The exact consequences for future policy and regulation remain unknown. It will take time to fully understand the implications of the vote, and it is important to note that Article 50 of the Lisbon treaty provides for two years, from the date the UK Government gives notice to the Council of Europe, to negotiate and agree exit terms.