All businesses hate uncertainty. Unfortunately, the referendum debate has brought plenty of this and it has already impacted on business activity and investment in the UK and the Republic of Ireland. The Republic's economy has been going through a sweet spot over the past 24 months. Unemployment has nearly halved from its crisis peak and national debt as the percentage of GDP will have dropped from a high of over 120% to about 80% by next year.
conomic growth was the strongest of any country in the EU last year and we will most likely top the EU table again in 2016. Thursday's referendum vote is a significant concern for business, however, and it has already added considerable uncertainty to the economic outlook.
Over recent months, Ibec has been focused on ensuring that the concerns of business in the Republic of Ireland were recognised in the congested Brexit debate. While this is a vote for the UK, the deep cultural political, cultural, geographic and commercial ties mean it would be negligent for us to passively stand by without making our voices heard.
The UK's EU membership is of key strategic importance to Ireland and Irish business, but the interests of the UK and Europe are also best served by a vote to remain. Ireland has worked closely with the UK across a wide range of areas in Europe and we are stronger when we work together.
A vote to Remain offers continuity for Ireland and the UK, but the fallout from the campaign will nevertheless reverberate for years to come. A vote to Leave is a much greater concern. It would prove damaging to Ireland's recovery and would push the EU back into an unstable period of crisis management, at a time when it should be looking to the future.
Brexit poses a number of serious risks to the Irish economy, in terms of exchange rate movements, trade disruptions, loss of investment and regulatory divergence.
Exchange rate movements are the most immediate risk. In the aftermath of a possible Brexit the sterling/euro exchange rate could well move towards parity. This would leave Republic of Ireland firms selling into the UK market 30% less competitive than they were in January through exchange rate movements alone.
Disruptions and barriers to trade between Ireland and the UK resulting from Brexit will be a costly burden for the Irish business community. Worryingly, any new UK-EU arrangements may undermine free trade. An agreement would take at least two years to crystalise, but is likely to take much longer. This would bring a level of uncertainty for Irish firms exporting to the UK in the short term impacting on employment, investment and export plans. The risk to trade flows has been underestimated because of the very significant knock on impact that changing investment patterns could have on trade.
Ireland could potentially stand to gain from investment flight following a Brexit, with some UK-based corporates and financial sector firms looking to relocate to the European single market. However, this potential upside would pale in significance to the negative disruption and uncertainty that would stem from the UK leaving the EU.
Firms operating within both the EU and UK markets would also have to deal with the prospect of regulatory divergence over the years ahead. For services companies operating in both jurisdictions, the impacts are potentially greater as it is possible that the UK would have to abide by common standards in their domestic services market. Any disruption to cross border commercial activity could have a very destabilising effect on the economy of Northern Ireland. Business north and south has been a major beneficiary of the peace process over recent decades, a UK departure from the EU would remove a shared economic, political and legal backdrop and could set back positive political and economic developments of recent years.
Through constant engagement with our members across a wide spectrum of sectors, it is clear that a vote to remain is still the overwhelming desire of the Republic of Ireland's business community.
As things stand, the result is too close to call. The last few days of campaigning and voter turnout will ultimately decide the outcome.
However, a vote to leave will have far-reaching implications for businesses north and south of the border. With that in mind, we say: Don't go. Let's work together in a stronger, forward looking Europe, that can support shared prosperity on the island of Ireland.
- Fergal O'Brien is the director of policy with Ibec, the Republic of Ireland's main business representative organisation