Silver lining for Ireland from Brexit, S&P argues

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Silver lining for Ireland from Brexit, S&P argues


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Ireland is more than four times exposed to the effects of Brexit than the median of 21 countries ranked by rating agency Standard & Poor’s, but there is a silver lining amid the economic clouds.

Most economic forecasters say there will be a big hit to the economy this year with growth slowing dramatically to the region of 1pc-1.5pc from 6.7pc in 2018, and the ratings agency sees a “sizeable shock” due to close economic links.

However, S&P highlighted in a report that some of the upsides of Brexit have already started to emerge as the process has unfolded.

These upside may accelerate if the UK does leave the European Union, especially if there is a no-deal Brexit with no transition period.

Around 4,000 jobs have been created by businesses relocating here, often in the high-paying finance sector from firms such as Barclays which has established its European HQ in Dublin.

That trend could accelerate and while the economic shock from a no-deal Brexit will be severe, the departure of the only other English-speaking country from the European Union will likely see Ireland grab yet more investment.

“We would expect that Ireland’s highly flexible economy would reorient trade toward even larger trading partners, such as the remaining EU countries and the US,” S&P said.

“We also think that Ireland is well placed to attract some of the foreign direct investment displaced from a post-Brexit UK, should UK-based financial subsidiaries and branches lose their coveted EU passporting rights, which currently enable them to sell financial services in the EU market,” the ratings agency added.

Ireland has already weaned itself off export dependence on the UK.

In 1973 when the State joined what was then the EEC, 55pc of exports went to the UK – now that figure is less than 10pc. According to research from economists at the National Treasury Management Agency, the economy is now far more geared to the US cycle than any other.

The potential for higher levels of investment was highlighted earlier this week in a report from the Economic and Social Research Institute (ESRI).

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The think tank said Ireland would become more attractive to multinational companies once the UK loses tariff-free access to the EU market.

In aggregate terms, the gain from foreign direct investment could amount to around €26bn, which would represent an increase of 3.3pc over the current stock of Irish FDI, it said.

Gains from this would be concentrated in the computer, electronic and optical products industries and would boost exports by 2.8pc over 10 years, the ESRI said in its report.

Irish Independent

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