Mark Kennedy explains why the Brexit adjustment will be as significant as German unification – and should be planned for accordingly.
As I write, the Brexit process grinds on, seemingly interminably. We are facing a UK election with the hope, one supposes, that this will provide the legal basis for a decisive exit from the EU. Friends in the UK still hope for an eleventh-hour about turn, but I don’t think it’s wise to base any plans on this.
So, what does it all mean for business? Well it’s perhaps good and bad. More time means more time to prepare. Many Irish businesses have taken the opportunity to prepare themselves for a 'hard' Brexit. The European authorities – both EU and national – have taken steps to prepare. The Irish Government has taken steps, with Enterprise Ireland and IDA both notably active on the business front.
A few sectors will point to deficiencies, but some things are simply beyond our control. There are matters, especially in a ‘hard’ Brexit scenario (or even in a ‘no deal’ scenario, which may return depending on the electoral arithmetic), that can only be dealt with in conjunction with the UK authorities. In truth, not much can be said on the topic of preparedness that is new.
There are, however, three points that may be worth some thought. The first is that we are entering a period of fatigue. Everyone is tired of Brexit, at all levels. Increasingly, there is a sense that we wish ‘they would just get on with it’. There is a danger in this – hasty decisions have long afterlives and there is still something important to be played for here. The desired outcome for Irish businesses must be a trading relationship that is as close as possible with the UK. Businesses should not be silent on this issue, even if frustration with the process might make one disinclined to try.
The second issue is services. Most of the debate thus far has focused on trade in goods. For Ireland – and the UK – the trade of services is at least, and probably more, important. There are signs that the UK Government has its eye on this, and I would not be surprised to see a newly mandated Conservative government positioning strongly on its services sector. This is complex territory – touching on financial services, technology and the myriad associated regulatory issues – and Ireland needs to be very careful in managing its position. Again, businesses should be active in pushing this agenda.
Last, the signs are that we are entering a cyclical slowdown. I remain positive about the fundamentals of the Irish economy, but less so about the global backdrop. Brexit will not help this. Whatever your business, prudence is the order of the day. There are, of course, business risks that should be taken – but on a thoughtful and well-planned basis.
There is every chance that Brexit will be on the agenda throughout 2020, whatever the outcome of the UK election. Even if we get a decisive result in the coming weeks, the transition will be complex. For businesses, this is an unwelcome additional complexity in what is likely to be a challenging period. Mazars’ advice to clients remains focused on careful planning and preparation, thoughtful risk management, and market diversification. And for government and EU authorities, I continue to suggest that this adjustment will be as significant as German unification – and should be budgeted and planned for in a similar manner and a spirit of solidarity.
Mark Kennedy FCA is Managing Partner at Mazars Ireland.