Ibec - for Irish business
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Arnold Dillon speech at University of Liverpool Open House Festival - 22 May 2017

22 May 2017
Thank you Professor.

And thank you for the invitation. It’s a real pleasure to be here this evening to set out some of the views of Irish business on the issue of Brexit.

The last time I was in Liverpool I was 12 and I was here for a football match. We lost 2-0, I was in goals and one went straight between my legs and the other straight over by head, between my hands.

I hope I leave a better impression this time.

Anyway, firstly, by way of background it’s worth giving you a quick overview of Ibec, the organisation I work for.

Ibec is the Ireland’s largest employers group and is the voice of Irish business on a domestic, European and international level.

We represent over 7,500 members, ranging from small firms, employing only a handful of people, to the largest global multinationals with major Irish operations and many thousands of employees.

Our members employ around 70% of the Irish private sector workforce, and we have over 200 staff in seven locations across Ireland, and in Brussels.

As you might imagine, Brexit is affecting much of what we are doing, and will do for many years to come.

Irish business hoped Brexit wouldn’t happen. Indeed, we actively campaigned against it.

In Ireland we know how unpredictable and volatile EU referendums can be. But, notwithstanding our own experience, the result was undoubtedly a shock and obviously a major disappointment.

What was perhaps an even bigger surprise, however, has been the increasingly enthusiastic embrace of a hard Brexit course by the British government.

The ambition to leave both the single market and the EU’s customs union is likely to dramatically change the economic relationship between the two countries.

It presents countless challenges and pitfalls, and there is a very real potential for a divisive and damaging divorce.

However, it seems we’ve reached a point of no return.

In the few minutes I have this evening, I want to share a few thoughts on why Brexit matters so much to Irish business and on businesses’ hopes for the negotiations and beyond.

The reasons why Brexit is such a concern are obvious?

The UK is a key trading partner and the primary market for many Irish businesses for a host of reasons; including market size, geographic proximity, a shared language and consumer tastes, and a similar common law legal system.

Our business communities and operations are intertwined across the two jurisdictions, to the point where we have a shared labour and consumer market.

As such, any change in the EU-UK trading relationship, either through the introduction of tariffs or non-tariff barriers, will impact Ireland more than any other EU27 country.

A customs border on the island of Ireland would be an economic and logistical nightmare.

While no deal, and a default to WTO tariffs would amount to an even more disruptive economic shock to the Irish economy, and the UK’s for that matter.

The UK accounts for 14% of Irish goods exports, the highest share of any European country, and double the exposure of the EU as a whole; while 20% of our trade in services goes to the UK.




These figures are not nearly as high as they used to be.

EU membership, and the platform it provided to develop a globalised enterprise model and diversify into new markets, has made Ireland much less reliant on the UK over recent decades.

But Irish-UK trade is still very significant for both countries, and the headline trade figures don’t tell the full story.

Certain sectors of the Irish economy remain particularly reliant on the UK market and are particularly exposed to the risk of Brexit-related trade disruption.

Our agri-food sector is the largest and most obvious example.

Total food and drink exports to the UK are roughly €4.4 billion per annum and this supports 46,000 jobs across the country.

The products involved are often particularly suited to the British market and the commercial relationships are well developed and have often been built up over generations.

The French have yet to acquire a massive taste for cheddar cheese, for example.

So diversification isn’t easy and even where possible, the big barrier is time. It can take many years to gain a foothold in new markets.

Brexit-related currency movements have already had an impact on exports. While it’s pushing up inflation on this side of the Irish Sea, a weaker sterling is making it more difficult for Irish exporters to compete with UK producers in Britain.

This has already manifested itself in weak food exports over recent quarters, even if the rest of the Irish economy continues to power ahead.

A very real risk is that Irish food producers selling primarily into the UK market choose to move processor capacity into Britain as a way of avoiding possible future trade barriers and hedging against currency volatility.

And of course Irish business relies not just on the free movement of goods and services across these islands, but also of people and talent.

In addition to the close and two-way trading relationship, language, history, proximity and cultural links mean that Ireland and the UK effectively share a labour market.

Many companies are organised on a UK-Ireland basis and the free flow of labour and talent between the two jurisdictions is crucial to smooth business operations.

Any disruption to the Common Travel Area (CTA), and existing EU labour market rules and free movement provisions, would particularly affect Ireland.


So that’s a summary of why Brexit is such a problem. But what can we do about it?

From an Irish business perspective, we first need to look at areas within our control.

What can be done to support companies and position the economy as a whole to weather the storm? And how can we take advantage of the investment and trade opportunities that will inevitable come Ireland’s way as a result of the UK leaving the EU?

This will require direct support to help viable companies trade through any volatility, an increased focus on cost-competitiveness and our business tax offering, and additional investment to ensure Ireland remains an attractive place to live, work and invest into the future.

Secondly, we need to ensure the best possible outcome from exit negotiations and in the new EU-UK trading relationship.

Here are four priorities from the perspective of Irish business:
    1. A smooth exit:

An orderly withdrawal of the UK from the EU, which includes a fair financial settlement and a comprehensive agreement to secure the rights of EU citizens in the UK, and UK citizens in the EU, is vital.

Getting an early agreement on exit terms is important to engender goodwill and move the discussion onto the much more important issue of what a future EU-UK relationship will look like.

The debate over the exit bill is a side show in economic terms, compared to what is ultimately at stake.
    2. A smooth transition:

Any EU-UK deal must include comprehensive transitional arrangements to avoid precarious “cliff edge” scenarios, and allow business time to prepare and adapt to a new trading relationship.

Continuity with exiting arrangements should be maintained until the point where a new relationship takes effect.
    3. The closest possible relationship into the future:

A new EU-UK deal must facilitate the closest possible economic and trading relationship into the future.

And a new free trade agreement should be as broad, comprehensive and ambitious as possible, covering both goods and services. It certainly should not seek to punish the UK, as other perhaps might wish.

However, a deal must not undermine the coherence and integrity of the Single Market. Clear, legally binding and enforceable provisions will be needed to ensure fair competition and resolve disputes; and regulatory divergence must be avoided or kept to an absolute minimum.

It is very much in Ireland’s interest to remain as close as possible to the UK economically post-Brexit, but it is increasingly clear that Europe, and European business for that matter, will not support a new relationship that effectively provides the benefits of the single market and customs union without the corresponding obligations that others have to sign up to.

At present, a massive gap exists between current UK government objectives and what is realistically possible within the parameters of the EU negotiating guidelines.

Hopefully this will change after the election.
    4. Unique Irish challenges must be addressed:

As already acknowledged by both the EU and UK, any new deal must recognise the unique economic and political challenges that Brexit presents to Ireland, and put in place a range of specific measures to address these.

This will need to include provisions on travel and labour market rights, while also addressing Ireland’s unique trade exposure and the challenges presented by a customs border with Northern Ireland.

Specific measures will also be needed to ensure the future development of the all-island economy is not hampered in any way.

Conclusion

Of course the title of tonight’s session is Ireland after Brexit, and despite all the immediate and understandable drama and debate over the future EU-UK relationship, Ireland’s place in Europe into the future is becoming an increasingly important issue in its own right.

Membership of the EU and the Single Market has been and will remain a central and vital part of Ireland’s economic success story.

The EU has provided a platform to develop a skilled and flexible workforce, an attractive and competitive tax regime, and has provided easy access to mobile talent and European and global export markets.

Ireland has been the fastest growing economy in Europe over the last three years and the underlying strength of the economy, means it is well-positioned to face the challenges Brexit presents.

And of course there will be opportunities, even if we weren’t looking for them.



If, for example, you’re a UK manufacturer, a financial services firm or a technology company seeking to maintain a presence in the EU, Ireland may well be the answer.

This is not where we wanted to be, but Ireland will be able to provide many companies with solutions to the dilemmas that Brexit is likely to present.

But the EU without the UK at the top table will be a very different place, and Ireland will feel the loss more than others.

Across a range of policy areas including the development of the single market and European trade policy, the UK was a natural ally.

Sadly this won’t be the case into the future.

Ireland and Irish business will now have to forge a new path in Europe, make new allies and advance our arguments in different ways.

And of course close Irish-UK business ties will adapt to Brexit and no doubt endure long into the future; albeit in a very different context.

Thank you.