Business

Ireland's Brexit fears: 'If things are bad in the UK, things are bad here'

"Big Mistake" beer Image copyright Reuters
Image caption A bar in Dublin made its feelings about Brexit clear by renaming one of its beers

The UK's vote to leave the EU sent shockwaves around the world. Tremors that are being felt perhaps no more so than in neighbouring Ireland.

Trade between the two countries is worth over €1bn (£775m) a week, and the fall in the pound means Irish exports will be more expensive in the UK, while cheaper British imports potentially undercut Irish firms at home.

Ireland has also been rattled by Chancellor of the Exchequer George Osborne's plan to cut the UK's corporation tax rate to under 15%.

That would bring it close to the Irish rate of 12.5% - a low rate that has attracted foreign companies and inward investment, and has been a cornerstone of the country's economic growth.

The UK plan has been played down by Irish Finance Minister Michael Noonan but not by others.

"The UK's decision to become much more aggressive in corporate tax rates provides a challenge to Ireland," says Danny McCoy, chief executive of IBEC, Ireland's biggest business representative organisation.

"The fact that Ireland is in the EU will be quite a distinctive advantage to Ireland.... If people need to get into mainland Europe then Ireland will retain its position as an attractive base.

Image copyright IBEC
Image caption IBEC's Danny McCoy says a lower UK corporate tax rate will make things "quite competitive between the two countries"

"But the corollary is that Britain is a much bigger economy with a stronger domestic market so those firms who need to get at that domestic British market, 65 million people, will be attracted by those corporation tax rates."

Future-proofing

Ireland's corporation tax rate has been criticised by other EU members, while its business-friendly tax regime has come under international scrutiny for helping multinational giants like Apple make huge tax savings.

But companies complain that high levels of personal taxation from austerity are making it more difficult or expensive to attract higher-paid staff to Ireland.

IBEC says that corporation tax is just one ingredient to develop a formula to compete with the UK outside the EU.

"Ireland is out of line with the UK when it comes to high personal taxes, high capital taxes and high taxation in the treatment of shares.

"I think the Irish government needs to adapt its taxation law to future-proof itself against a more aggressive UK in its corporate tax base," says McCoy.

Border concerns

Brexit is a serious jolt to a country coming out of recession with big economic links to Britain.

But for parts of the island emerging from decades of violent conflict, which the 1998 Good Friday Peace Agreement helped end, there are other immediate difficulties, such as the border.

Nestled just inside the Republic is Silver Hill Foods, near Emyvale, County Monaghan. Ducks reared by local farmers on both sides of the border are exported as far away as China - but Chinese restaurants in the UK are a key market nearer home.

Image caption Silver Hill Foods farms ducks on both sides of the border

The firm's trucks criss-cross an unmarked international boundary.

In darker days, the border bristled with long queues at military checkpoints and customs posts, hindering trade in a region once blighted economically by political instability and violence. Peace has brought investment and new workers to the area.

Image caption Only a road sign proclaiming County Tyrone indicates you are in Northern Ireland

Many of the Silver Hill Foods staff are Lithuanian - with worries over the post-Brexit status of those living in Northern Ireland. But the biggest concern is a return to a "hard border" says head of sales, Barry Cullen, who lives in the north but works in the south.

"With the border coming down, there was free trade, you can travel freely north and south so it was a welcome boon. Money from Europe was invested in the region, infrastructure was improved. Europe has been very good for us in this part of the world.

Image caption Barry Cullen says a return to border controls would be a "backward step"

"We just hope it doesn't go back to the bad old days of the 1980s and 1970s."

Delayed supplies

Down the road in Dublin, Ronnie Ritchie owns one of Ireland's oldest sweet manufacturers, HG Ritchie. He has previously spoken about fears over his company's supply of sugar if Britain left the EU.

"Sugar [and glucose]... are available from Europe but this will add probably a week to two weeks to getting supply," he now says.

"Other risks would be flooding of the Irish marketplace by bigger British manufacturers, and also where our markets are going to be after the UK does in fact leave. I think it's a shock to a lot of people."

Image caption Will Brexit affect the sugar supply to Irish sweet manufacturers?

Fears over the health of the UK economy are also a worry in Ireland, given the close economic links, says Patricia Callan, director of the Small Firms Association, representing 8,000 Irish firms.

"Our researchers here would estimate that a 1% decline in UK GDP would mean a knock-on impact of losing a third of a per cent of our GDP regardless. So if things are bad in the UK, things are bad here," she says.

"And we're also going to be much more isolated. We're an island off an island off the EU.

Image caption Problems in the UK economy are also bad news for Ireland, says Patricia Callan

"And in policy terms, in a lot of things that we negotiate on at the EU we were normally at the same side of a debate, now we don't have a really strong ally in those discussions - and that's concerning too."

Alternative base?

Enticing firms to Ireland, as an alternative EU base to the UK, is part of the Irish government's post-Brexit action plan - but is a limited measure, says IBEC's Danny McCoy.

"We will see some of that in the financial services sector - but there's a whole host of other sectors where that's not a compelling case and in fact Ireland may lose corporations to a much more aggressive UK so it's swings and roundabouts," he says.

But his organisation wants Britain to remain as close to the EU as possible.

"Brexit is not good news for anybody, it's a bad decision. A bad decision for Britain, a bad decision for Ireland and a bad decision for Europe more generally.

"But given that it is a decision we'll try to make the best we can, which includes making sure that Britain has access to the single market. That's in Ireland's best interests."

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