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Brexit: We must build on the good relationships we have

Published 25/10/2016

Currency rates have been affected by the decision for the UK to leave the European Union
Currency rates have been affected by the decision for the UK to leave the European Union

It's easy to see why Theresa May has delayed setting out a detailed Brexit roadmap. The more clarity that is brought to the issue, the more the hard political choices and economic risks crystallise.

The recent collapse in sterling reflects not only the heightened concern around the UK's future relationship with the EU, but also the stark realisation that UK's political objectives increasingly seem to be at odds with economic interests.

Plans for firm migration controls and the spurning of European Court of Justice jurisdiction could easily put the UK out of the single market.

This is bad news for the Republic, and indeed Northern Ireland. Any disruption to the current trading relationship will add costs and fuel investment and supply chain uncertainty.

The integrated nature of our north and south economies, our land border and our deeply entwined history mean Ireland, north and south, will be disproportionately affected.

Many exporters in the Republic are already reeling. The collapse in sterling has put those selling into the British and Northern Ireland market at a massive and sudden competitive disadvantage to local suppliers, and this problem is likely to remain.

The current change in currency value is likely to be structural, not cyclical, and has occurred following fundamental changes to the economic and business environment in the UK.

It is difficult for many businesses to pass through currency changes to export customers or to absorb them. The likely damage for businesses in the Republic is potentially enormous in terms of reduced export volumes and job losses.

A review of the historical exchange rate and agri-food export relationship shows that a 1% weakness in sterling results in a 0.7% drop in Irish exports to the UK. If sterling was to remain around the £0.90 mark, this could easily translate to losses of over €700m (£623m) in food exports and about 7,500 jobs in that sector alone.

In the Republic urgent, targeted action is required to protect our vital exports to the UK market, limit damage in the domestic market from cheaper imports, and address competitive pressures caused by the fall in sterling.

But we need to go further. Ibec has long highlighted the competitive threat from the UK's increasingly pro-business tax regime. This is likely to intensify as it seeks to redefine the post-Brexit offering. We need a wholesale reform of our business and personal tax offering to ensure we can compete effectively into the future.

Early next year, the UK is set to trigger Article 50 and begin formal exit negotiations. Ireland and the Northern Ireland Executive must play a central, collaborative and constructive role in what is likely to be a fraught process.

A hard Brexit, with the imposition of tariffs, restrictive rules on migration and the resulting disruption to trade flows, investment and the regulatory environment, would be deeply damaging to business and economic interests.

For this reason it is important to Irish business that the UK retains access to the single market on grounds as close to full membership as possible. We need to support these efforts.

The political settlement in the north needs to be afforded a special status, along with a continued commitment to the development of the all-island economy. And the common travel area between the UK and Ireland must be preserved.

It is more important than ever that we sustain and build on the positive and mutually beneficial relationship we currently enjoy.

Belfast Telegraph

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