Ireland to benefit from Johnson’s majority amid ‘topsy turvy’ Brexit risk
Irish business leaders and analysts have hailed the prospects for the UK approving the withdrawal agreement next month but warn that the risk of Brexit disruption may be just delayed for a year.
The surge in sterling marks “a good time for Irish exporters” and Boris Johnson’s huge majority lessens the influence of Brexit hardliners considerably, according to head of business group Isme, Neil McDonnell, noting the debate has started over whether the prime minister will sign up to a much softer form of Brexit and a much closer relationship with the EU than once appeared.
The outlook for Irish firms is a lot “sunnier” than only a few months ago, he said.
Aidan Flynn, general manager for the hauliers group Freight Transport Association Ireland, said Mr Johnson’s majority will ensure the withdrawal agreement can be approved next month but that the “topsy turvy world of Brexit” could return for Irish business as the deadline for agreeing to a trade deal by the end of 2020 draws close.
Meantime, a rise in the value of sterling “is always good for Irish firms”, he said.
KBC Bank Ireland chief economist Austin Hughes said Brexit could still loom over the outlook for the Irish economy next year.
However, the outcome of the election “removes virtually all uncertainty about near-term developments in relation to Brexit and suggests the possibility of a short-term Brexit bounce in Irish consumer spending and some exchange rate assisted support for Irish exports to the UK”, he said.
At Deloitte, Sean Smith continued to urge Irish firms to prepare for potential curtailed access to UK markets.
“Some changes are known, such as the freedom of movement ending.
“But many — including access to services, tariff arrangements, and data management — are all still on the table,” he said.
Lee Evans, head of foreign exchange trading at Bank of Ireland Markets, said that currency markets “will quickly turn their focus to the negotiation of a new EU-UK Free Trade Agreement which could limit sterling strength in the new year”.
Economist Alan McQuaid predicted that sterling will continue to rise in 2020 and provide a further boost to Irish firms exporting into the UK.
It was very difficult to predict what will happen as the deadline to striking a trade deal draws nearer “because no country has left the EU before”.
He said any “damage to Ireland won’t come until later when we know what the UK comes up with”.
Mr Johnson could, however, quickly hit the ceiling over spending plans, said Conall Mac Coille, chief economist at Davy.
The surge in sterling was signalling that investors saw little risk now of a no-deal outcome, he said.
John McGrane, who heads the British Irish Chamber of Commerce, said that the focus has switched beyond approval of the withdrawal agreement next month to the shape of a comprehensive trade deal that the UK will eventually strike with the EU, saying that “getting the best deal is going to be far more important than getting a quick deal”.
He added: “These talks will ultimately decide how businesses across these islands interact and trade with each other over the longer term and will be far more consequential for business and trade.”
Ifo, a leading think tank in Germany, said that a hard Brexit was unlikely but it was “still too early to give the all-clear”, pointing to difficulties in striking a big trade deal by the end of next year.
“Scotland is heading towards a second referendum on independence, which will also create uncertainty,” it said.
Sarah Carlson, Moody’s lead UK sovereign analyst said that Brexit uncertainty will linger despite Mr Johnson’s majority because of the “relatively short transition period to which the prime minister is currently committed”.
The UK will continue to face the challenges over budgets and economic low productivity, Moody’s said.
