Belfast Telegraph

We can agree on risks of Brexit, but not solutions

Analysis

By John Simpson

Brexit was high on the list of areas of concern for many senior policy-makers from the public and private sectors on both sides of the border when I took part in a large and well-informed all-island professional discussion group in Dublin.

In Northern Ireland, Brexit has developed with a clear disagreement between the main political parties, and the business community is apprehensive about the effects.

From a Dublin perspective, the Brexit debate is worrying but less politically divisive. In a restrained debate, there is regret that the UK is leaving. In some respects, adverse Irish consequences are the unplanned impact of UK decisions.

Arguably, the withdrawal of the UK from the EU might be seen as Ireland's opportunity to attract more foreign investment from the US, since it offers an English-speaking base and has the advantage of remaining in the EU.

The Irish assessment gives more emphasis to the disruption of the benefits to Ireland from the European single market and the costs of the possible end to the customs union.

On both sides of the Irish border, there is evidence from many businesses that they expect to be disadvantaged. North and south, there is a shared apprehension that Brexit will put some firms at risk. While Brexit will bring a series of important changes in the operation of the British and Irish economies - the impact of which will become clearer over the next three years - there are a number of influences affecting the island of Ireland.

During 2018 and 2019, the wider influence of national, international and regional economic trends is continuing to impact upon employment, average income levels and economic growth.

There is an emerging contrast. In Northern Ireland, the economy is growing only slowly and compares unfavourably with some other UK regions.

In the Republic of Ireland, meanwhile, economic tension is focused on 'overheating' - the economy growing at a rate that risks unwelcome consequences of success such as skills shortages, wage increases ahead of productivity gains and difficulties in meeting climate targets.

There are questions about the adjustments in the labour market to changes in the recruitment of migrant employees.

Contrasting with the long history of Ireland, living with high levels of emigration, recent years have seen a significant inward flow of migrant labour.

For Northern Ireland, the success of a robust increase in the levels of employment has depended on the arrival of people mainly from eastern countries in the EU.

There is a concern that the Brexit agreement may either prevent or deter this pattern of recruitment.

Will the economy of the Irish Republic be advantaged by retaining full freedom of movement of workers across the EU?

The agreement by the UK Government that UK-Ireland relations will permit the continuing operation of the common travel area between the two countries offers a method of avoiding some of the possible barriers to a flexible UK-Ireland labour market. However, there is also a possible complication if, for potential employees, the Irish border becomes a back door for incoming workers.

Both Northern Ireland and the Republic face possibly critical decisions on business corporate taxation. For Northern Ireland, operational decisions on setting a possible tax rate are currently suspended. For Ireland, meanwhile, there is the continuing uncertainty about the EU ruling on the tax liability of the large multi-national IT and pharmaceutical businesses. These are contrasting issues, but they point to the continuing and important differences in fiscal policies between north and south.

Policy-makers in Ireland have two issues on their agendas that should read across both jurisdictions: (a) the increasing degree of income inequality and its social significance; and (b) providing an increasing supply of affordable social housing.

Agreeing that these are important issues still falls short of pertinent proposed actions.

Belfast Telegraph

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