Tough talks over the British question
It’s been a hectic Westminster weekend after a hectic fortnight in Dublin, Brussels, and London, as politicians frantically try to get a Brexit transition deal done before an October 31 deadline.
The marathon talks failed for the time being to convince MPs to allow a meaningful vote on Boris Johnson’s new withdrawal deal and the British prime minister still insists that he will take Britain out of the EU on Halloween — come what may.
As such there are still more questions than answers but when Britain does eventually leave, assuming Mr Johnson doesn’t engineer a crash-out, there is still the transition period to go through.
That will, of course, involve all the tough negotiations on the exact details of what Britain’s future relationship with the EU will look like, from both an economic and social basis.
No matter how it plays out, Britain’s departure from the EU will have adverse consequences for Ireland, both north and south.
The Irish economy will take a hit, though the exact extent of the damage is hard to predict at this stage because there are still too many unknowns.
The economy performed very well in the first half of 2019, but key sentiment indicators have weakened in the third quarter.
The latest sign of a downturn came in the past week with the release of the Ulster Bank Construction Purchasing Managers’ Index.
The building industry is a key component of the Irish economy and was the sector that took the biggest hit during the financial crisis, with significant job losses.
The September numbers don’t bode well for the future.
The index plunged to 48.3 in September from 53.7 in August.
This was the first contraction for Irish construction output since August 2013, and the cause was the effects of Brexit uncertainty.
Commercial building activity fell for the first time in over six years and civil engineering work declined for the 13th straight month, while badly-needed house construction grew at a much softer rate.
Meantime, new order growth in construction eased for the third month running, and employment growth in the sector hit its lowest level in nearly six years. At the same time, buying activity fell for the first time since February 2014.
On the building prices front, the rate of input price inflation was little changed from August’s 64-month low.
Nonetheless, cost burdens rose at a sharp pace amid reports of greater prices paid for copper, steel and insulation.
In other data published in recent days, the CSO said that exports to Britain fell by €44m to €1.09bn in August compared with August 2018, though exports to the UK accounted for only 9% of total exports.
The value of sterling and how the pound is performing on the foreign exchanges is a key element, with a weak UK currency making imports into Ireland cheaper but exports more expensive.
The numbers also highlight that while all the talk on Brexit has been on the potential damage to Irish exports, the bigger effect on overall trade involves imports from the UK.
What do the figures show? The value of goods exports to Britain in the first eight months of 2019 was €9.5bn, up by €434m from the first eight months of 2018.
Imports from Britain fell by €77m to €1.38bn in August from the same month in 2018.
Imports from Britain accounted for over a fifth of the value of total imports in the eighth month of this year.
The value of goods imported from Britain for the period January to August 2019 was €12.6bn, an increase of €864m from the period January to August 2018.
And then there are other risks.
Caught up in the Brexit saga, there is a danger of ignoring the fallout from political tensions over Turkey’s direct intervention in Syria.
We must hope for better times.
