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Four lessons to learn from the Brexit process

Mar 22, 2019

Whatever the outcome, Ireland has positioned itself well post-Brexit. However, we should not look at Brexit as an indicator of our prosperity but, instead, learn some lessons from the whole process so far, argues Neil Gibson.

The island of Ireland remains in the eye of the Brexit storm, and it is incredibly difficult to write an article looking ahead when so much remains unknown. At the time of writing, a so-called ‘hard Brexit' – whereby the UK leaves without an agreement and reverts to World Trade Organisation trading conditions – remains a possibility, albeit one neither the EU nor the UK particularly wants. However, despite the disruptive nature and the undoubted potential for significant disruption, many themes can be drawn from the whole process.

1. Ireland faces Brexit from a position of relative strength. The good news for the Irish economy is that it is growing rapidly and enjoying a period of robust job creation. In 2018 alone, Ireland added 50,000 net jobs and increased by a Europe-leading 6.7%. As a result, there are firms ready to hire any staff that become available, and the government has the resources to provide targeted financial support to mitigate any adverse effects (EU law notwithstanding). Ireland is in a much more favourable position than it has been at any point over the last decade.

2. Brexit is not the only challenge to be faced. At times, Brexit can feel all-consuming, but it is far from the only problem Ireland and Irish businesses face. Skills shortages, rising costs, and the impact of disruptive technologies on business models and processes are just a few that frequently top the corporate risk register, along with global trade wars and the effects of climate change. Government finances may have improved but per person debt levels are still very high, and this means the economy will not be able to deal with any marked slowdown in the way that it did a decade ago.

3. The reasons behind Brexit provide useful insights for all. There have been endless column inches and TV debates arguing over points to do with Brexit but very little time has been spent on truly understanding why so many people voted to leave.

The reasons are complex, but the over-riding lesson to learn is that looking at economic growth figures will not help you achieve an understanding of citizens’ level of contentment. Quality of life indicators are becoming increasingly important to consider in tandem with growth data – are hospital waiting lists increasing or decreasing? Are commute times worsening? Is finding a school place becoming more difficult? A diminution in indicators such as these can lead to considerable resentment amongst citizens, regardless of how fast an economy is growing. Somewhat more controversially, there is a growing recognition that many people would trade off income for a better quality of life. This realisation can fundamentally alter national policy direction and suggests that Ireland needs to monitor a different dashboard of indicators if it is to maximise the lessons from Brexit.  

4. Competitiveness is critical. Despite a return to protectionist and populist policies in many parts of the world, it is still the case that the world is becoming ever more globalised. Competition is increasing in almost every location and sector. Already, Ireland is an open, outward-looking economy and that trend will continue. As such, every business and individual will need to be globally competitive. The good news is that Ireland scores well on many global measures of competitiveness; however, it cannot be complacent with regards to investment in skills, infrastructure, innovation and connectivity.

Almost every developed economy in the world wishes it was enjoying Ireland’s level of economic growth. The job market is booming, and even post-Brexit Ireland is presenting opportunities – for example, it currently tops the list of European cities into which UK banks are transferring activity, according to the EY Financial Services Brexit Tracker. Yes, there are areas of concern, not least the indication that many essential quality-of-life measures are not improving as might be hoped, and that the underlying fiscal position remains precarious, but having recovered from the devastating effects of the 2008/09 recession, Ireland can face Brexit with a degree of confidence. Beware of any overconfidence, however. In a global world, the quest to improve competitiveness is never-ending.

Neil Gibson is Chief Economist for EY Ireland.