Brexit in Kinsale

A few months back we were mulling over the idea of carrying out a survey on the forthcoming Brexit referendum in the UK. Was it worth the time and effort? Was anyone really interested in a referendum on whether the UK remains a member of the European Union?

Two things happened to change our minds. First, one economic commentator stated that this referendum would be the most important in a generation. Others put forward various arguments as to the impact a Brexit ‘yes’ vote would have but it became clear that this was a subject worthy of further investigation.

Cormac Fitzgerald

Cormac Fitzgerald

Second, Cormac Fitzgerald of Fitzgerlad & Partners in Kinsale asked if we would be interested in sponsoring a breakfast briefing on the subject of Brexit. No one needs a second invitation to visit Kinsale. We signed up there and then. An additional draw to the Brexit seminar in Kinsale was that noted economist, Jim Power, would be the keynote speaker.

Paraic Nolan

Paraic Nolan

The seminar was held in the Blue Haven Hotel and on the day close on 50 businesses attended. The Lord Mayor of Cork, Cllr. Chris O’Leary came along as did the Chairman of the of the Kinsale Chamber of Tourism and Commerce, Tomas O’Brien. Paraic Nolan, Big Red Cloud’s CTO, introduced Jim Power.

Jim Power was excellent. He lay the groundwork for the audience by providing a detailed overview of the economic backdrop, both from a global perspective and an Irish one. Ireland is, after all, an open economy, so any changes on the international stage will directly impact our economy.

According to Jim, the developments so far in 2016:

  • Global uncertainties exist especially in the Chinese economy.
  • ECB cut rates and increased quantitative easing.
  • The Unemployment rate in Ireland now stood at 7.9%. It was 14.8% four years earlier in 2012.
  • Car sales were up +26% and light commercial vehicles up by +29%.
  • Tax revenue was ahead by +9.1% or €475 million.
  • Q1 employment added 47,000 new jobs,  retail sales were 8.5% up and exports up 1.9%.

Overall, the economic momentum was still good.

However, Jim outlined challenges that are ever present:

  • The external uncertainties as referenced above; China is but one of the major global powers that has a degree of uncertainty hanging over it.
  • The downward pressure on oil prices has been very favourable for Ireland. This could change and signal a significant increase in our oil bills.
  • The weak € has been great for exports and the UK and US economies are still relatively buoyant.
  • The housing challenges in Leinster and to a lesser degree elsewhere are an immediate threat to our competitiveness.
  • There is increasing pressure on the government to revisit some of the pay agreements with the public sector.
  • The very nature of the newly elected government may lead to political uncertainty in the months to come. As Jim noted, “There is a danger that fragility of government will prevent ‘strong’ policy making.”

With regard to Brexit, he outlined two key issues that could affect Ireland:

  • The agriculture, food & beverage exports are most vulnerable as UK consumers would now be open to cheaper roducts from non-EU producers.
  • Barriers to trade could increase the price of UK imports to Ireland.

He also provided a supporting cast of other challenges:

  • The land border with Northern Ireland would probably require border controls.
  • We now operate in all-island energy market and Brexit would have an impact.
  • UK corporate tax policy no longer tied to EU rules most likely would change to offer more favourable rates.
  • Without the UK, Ireland would be more isolated at the EU negotiating table. The UK has been a great supporter and ally of Ireland in the EU. We would lose that support.

Jim noted that it was incumbent upon the newly elected Irish government to have some scenario planning in situ should the UK electorate vote to leave the EU. There is no doubt that a UK exit would cause uncertainty for trade, migration and currencies. He recommended that the Irish government must focus on creating a sustainable and competitive economy.

Prior to Brexit in Kinsale we carried out a survey of Irish businesses and accountants and you can download a copy of the Brexit survey results here.

A final thanks to Cormac Fitzgerald and his team for a most memorable stay in Kinsale.