With Trump on one side of the pond and Brexit on the other, our Emerald Isle is sandwiched between two of the most vitriolic events unfolding in recent history. The honeymoon period is over for Trump and as for Theresa May, Brexit has stampeded to the headlines of our newspapers for months. Sooooo what does that mean for Ireland, our little island plonked between the two?
Ireland’s Corporate Tax is 12.5% and is a haven in Europe for large corporations. From Google to Apple and Facebook who all have Headquarters in Ireland, we home a portion of the the crème de la crème of the business world. Let’s not kid ourselves, along with being in Europe and having an educated work force, our low corporation tax makes Ireland stand tall amongst the other hard ballers in competition for large businesses.
This is about to come into jeopardy by Trump who has promised to lower U.S Corporation tax from a high 35% to a much lower 15% as well as investment in infrastructure. America’s sky high corporation tax has driven U.S companies from the states – to the benefit of Ireland. According to a report by the Irish-American Chamber of Commerce published in 2015, direct investment in Ireland has totaled $277 billion in twenty years. Whoa!!!!
Trumps cut in corporation tax may implement Ireland hugely. If large companies are attracted stateside and get packing, Ireland will see job losses and may be set back to making our own shillelagh’s instead of importing them from China! ( really, you can buy these traditional Irish yolks from ebay imported from China http://m.ebay.com/itm/201758266923?_mwBanner=1 )
The U.K has hopped on the bandwagon of dropping their corporation tax which will plummet to 17% by 2020. Years ago, this low corporation tax would be unthinkable for Britain with such a high domestic market, but in these threatening times, Theresa May (U.K Prime Minister) is trying to keep as much business within her walls as possible and lowering corporation tax is one way to do it.
The current rate (as of today) is €1 to $1.05. This ain’t good for us folk going on holidays to the States. I’ll put it to ya this way, back in 2010 a euro would be equivalent to $1.40. That means that when you went into Abercrombie, everything was 40% cheaper to buy than it would be in Ireland. Sadly, today it’s a meager 5%. However, it isn’t all bad. It has become significantly cheaper for Americans to come to Ireland. Ireland’s economy is boosted by tourism and according to the Irish Tourism Industry Confederation (ITIC), tourists spend €1.4 billion while here. That is some dosh! A stronger dollar means more American tourists and that is certainly a good thing.
Unfortunately, it works the other way with Britain. With a weak pound it is becoming increasingly more expensive to come to Ireland which will damage our economy. ITIC has said that Brexit will be the largest challenge for Irish Tourism since the crash in 2008 with Brexit causing Irish holidays to be 18% more expensive. If there is a “hard Brexit” meaning the pound weakens further, this is not good news. Again with the implementation of a border between Northern Ireland and Ireland, Irish Tourism is set to have quite a challenge to face.
There is no doubt that Britain is Ireland’s most lucrative trade partner. According to British Irish Chamber of Commerce (BICC), trade between the two accounts for 400,000 Irish jobs with trade worth 1.2bn weekly. This relationship is set to come under threat if negotiations between the EU and Britain lead to a hard Brexit. Post the triggering of Article 50 (when they leave the EU), tariffs on imports and exports could be as high as 30%. This will severely damage the booming Irish meat and dairy exports across to our neighbours. With higher tariffs on Irish exports and a weak pound, Irish goods and services will reach sky rocket prices – unless an agreement is made between the two … only the future knows that.
The Single Market
The ‘single market’ is a phrase that has been flung around since the beginning of Brexit. Put simply, the single market allows for the free movement of goods and services as well as labour throughout the Union. This allows businesses and financial firms within the U.K to lap in the luxury of free trade without tariffs throughout all member states and access to the millions of citizens within the Union. According to the Office of National Statistics, 44% of exports go to the EU. With a leave from the single market and an imposition of admin costs/taxes on their exports- this is bound to hurt businesses situated in the U.K.
The European Economic Area (EEA) includes E.U member states as well as Iceland, Liechtenstein and Norway who all benefit from free trade. London is a financial base because it is situated in the EEA and thus businesses and banks take use of the single market. If the U.K fail to negotiate an agreement that sees them remain in the EEA, then it is highly likely that relocation will occur to other countries that are still within it.
What does this mean for us? Well, if relocation of business and banks occurs due to reduced access to the E.U market, Ireland is in prime position to benefit from this – making Ireland a financial power-house. (Good news for once eyy!!) According to research from John Ring of Knight Frank agency as part of the Dublin Office Market Review and Outlook for 2017, Ireland could benefit from 15% of businesses relocation post-Brexit with a creation of 13,125 jobs here.
A week in politics can create a lifetime of changes and as negotiations go underway with Brexit and as Trump continues to baffle us all only one thing is certain – our island is bound to be affected by the hullabaloo.