Today's speech by UK Prime Minister Theresa May firmly lays the foundations for a hard and potentially very disruptive UK exit from the EU.
Positive notes were struck on the need for good UK-EU relations into the future and the continuance of the UK-Irish common travel area, but the UK has its sights set on a decisive, clean break. Theresa May has presented a clear, combative approach to negotiations, which could ultimately cause very significant damage to UK Irish economic relations. Given the political capital invested, the UK position is unlikely to change.
The UK said it will leave the EU Single Market, but wants a comprehensive free trade deal, and has proposed an a la carte membership of the Customs Union that would still allow it to sign new trade deals with other countries in its own right. It's a 'having your cake and eating it approach', that will not sit easily in the vast majority of European member states.
The possibility of the UK leaving both the Single Market and the Customs Union raises fundamental questions about Ireland's future economic relations with the UK. In a worst-case scenario, a return to WTO rules would be a significant economic shock to the economy and would hit Irish exporters hard. It would also set the UK and Ireland on very different economic trajectories, disrupt trade flows between Northern Ireland and the Republic, and set back existing UK Irish economic ties.
While Theresa May has signalled a desire for a more globally focused trading Britain, the position she has adopted may leave an increasingly nationalistic Britain more isolated for many years to come. The UK approach adds to uncertainty and instability, as the outcome of negotiations is impossible to predict. The Irish economy is uniquely exposed. The UK position also came with a thinly veiled threat.. If the EU tries to punish the UK in negotiations, they reserve the right to adopt a highly aggressive business model, slashing corporate tax and regulation.
These developments present major challenges to Ireland and to Irish business. Ibec is in ongoing contact with the EU institutions and our counterparts in other European business federations, to ensure that Irish business interests are forcefully represented in negotiations. Domestically, we are pressing government and opposition with a set of comprehensive policy proposals designed to best position the country to navigate this uncertainty and make the most of opportunities that arise. At an EU level we are doing the same. Ibec is also working to support you as you make contingency plans and I will be in touch again over the coming weeks to update you on this work.
I will continue to keep you posted on the detail of Ibec's work over the coming weeks and months and on where we believe the Irish government negotiations are best positioned. We are firmly focused on representing your interests and supporting your business.
Get in touch if we can help.
All the best,
Tuesday, 17 January 2017