Services could be saviour for relations post-Brexit
To even the most charitable observer, Theresa May’s whistle-stop tour of the UK has at times been Quixotic, writes
Her nationwide charm offensive, in which she is battling to shore up support for the draft Brexit deal she agreed with the EU, faces an uphill struggle.
With the DUP, Labour and a sizeable number of her own Conservative MPs all opposed, the chances of the proposed deal making it through next week’s crunch Westminster vote are slim.
After two years of negotiations, the deal is a compromise which pleases neither Brexiteers nor Remainers.
For the UK, the stakes are huge. Last week, the Bank of England warned that if the UK crashes out of the EU without a deal, the pound could lose a quarter of its value and the British economy could plunge into a deep recession.
The fate of Mrs May’s deal — and perhaps her premiership too — now lies in the hands of British MPs, who will vote on whether to accept or reject it a week tomorrow on Tuesday, December 11.
But whether the deal clears its Westminster hurdle or not, the text gives some reassuring clues to what Ireland’s future trading relationship with the UK will look like.
Two things are clear — the British government is determined to avoid the creation of a hard border in Ireland, and is willing to make concessions in order to protect frictionless trade between the EU and a post-Brexit UK.
Much has been made of Ireland’s reliance on the UK, not just as the primary source of our imports but also as a key destination for our exports.
Official figures from the Department of Finance show that in services, Ireland has a big trade surplus with the UK. Some 16% of our services exports go to our British neighbours, while just 6% of the services we import come from the UK.
As one of Ireland’s leading exporters of financial services, Fexco knows better than most how valuable the UK is as a market.
At this stage, a reversal of Brexit looks unlikely. But whether Britain chooses an orderly divorce or a messy ‘no deal’ exit, the direction of travel is clearly towards the UK ending up with some sort of Canada-style free trade agreement with the EU.
Such a destination would put Ireland’s services sector in a strong position. Mrs May’s Brexit plan reveals how London dare not interrupt exports from its own dominant services industry — which, let’s not forget, accounts for nearly 80% of the UK economy.
Whether Mrs May’s plan succeeds or fails, Britain will have little choice but to allow Irish services exports to the UK to continue, in order to protect its own service exporters.
Ireland shouldn’t take for granted the willingness of other EU countries to remain open to services imports from the UK. But the EU’s offer to allow relatively free trade in financial services to continue, under a regime known as equivalence, bodes well.
With the UK Treasury predicting that all forms of Brexit will leave it worse off, future British chancellors will have limited scope for tax cuts.
Meanwhile, Ireland’s low corporate taxes will continue to attract global companies, and our continued membership of the EU will help us lure bright and ambitious European workers put off by the UK’s post-Brexit immigration curbs.
The net effect will be to give Ireland a distinct advantage over its larger neighbour when it comes to luring global capital and talent.
Ours is a small, open economy that has already faced down one seismic financial shock in the past decade. We can do it again.
That resilience, coupled with the benefits of EU membership and continued free trade access to the UK, will give Ireland’s services sector a vital role to play. Irish services’ interdependence with the UK can be a strength, not a weakness.
While none of us would have chosen Brexit, we should seize 2019 as an opportunity to be a global bridge between both the UK and the EU.
