THE LONG TERM PROSPECTS FOR IRELAND IN AN EU WITHOUT BRITAIN REMAIN GOOD

Richard Pym, Chairperson, Allied Irish Bank (AIB), former Group CEO of Alliance & Leicester

 

This paper covers three inter-related topics, Brexit, UK business relocations and Ireland’s infrastructure, and I will deal with each in turn.

The UK has a minority government, split on the terms of leaving the EU, coupled with an essentially pro-Remain legislature which must approve the legislation to leave. It is an unsatisfactory situation and the outcome entirely unpredictable. This minority government just does not have the bandwidth to create the replacement regulatory structures and policies by March 2019. Amongst this chaos we could easily end up with a hard, car-crash Brexit and it is also conceivable, although unlikely, that Britain could even Remain. For business planning purposes, you must assume that Britain crashes out without a deal.   Remember the British Prime Minister said, “no deal is better than a bad deal”, which is odd as surely “no deal” must be the “worst deal”. Whilst there are a few grown-ups in the British cabinet like Phillip Hammond, there are also those seemingly determined to continue adolescence beyond previous age boundaries, and for whom “no deal” would be victory. These are the people who dream of creating a new British-led world trade order described as Empire 2.0.

THE TWO POPULATIONS SEE EU MEMBERSHIP VERY DIFFERENTLY
Britain wants to leave the EU, leave the single market, leave the customs union, leave the ECJ, control freedom of movement, cease financial contributions and retain the benefits of membership. They want to buy something that isn’t for sale and hasn’t even been invented. This just isn’t going to work out well. I have a recurring nightmare of Marshall Foch’s railway carriage being dusted off for the signing of the British surrender in March 2019. Boris Johnson, sitting where representatives of the French government sat in June 1940, enjoying his cake with his afternoon tea; looking like Billy Bunter with cream on the end of his nose.

For the British, EU membership has coincided with national decline. The retreat from empire in the 40s, 50s and 60s was a decline of power which then continued with membership of the European Community. The British pay in and get nothing out: that is the perception. Very differently, for Ireland, membership has generated investment and modernisation, and sparked a national renewal. That is why the two populations see EU membership very differently: one sees decline, the other renewal.

Britain also sees Europe differently to Germany. Britain had a tough Second World War and whilst the civil population suffered, the pain of ordinary Germans was worse.   The levels of physical destruction of German cities and the fears of marauding Red Army soldiers were enormous. Read the autobiographical novel “Nightmare in Berlin” by Hans Fallada to feel the awful suffering of Berliners in 1945, the city population mass doping on morphine to ease the pain. Read the recent obituary of Helmut Kohl and of his first wife being raped by invading Russians at the age of 12 and then thrown out of a window.   Modern Britain has mercifully never suffered an invasion, but most of Central Europe has and sees the benefits of political integration. Britain might dislike the ECJ but it is much better in resolving disputes than a tank brigade. That is why the German Chancellor will put the European Union first, relations with Russia second and Brexit a distant third.

Whilst in Germany Brexit is not the main foreign policy issue, for Ireland it is. It has been described as the biggest crisis since the emergency in 1939. A car-crash Brexit leaves Ireland with customs duties on the border with the North, its trucks stuck in line behind British ones in a two- day queue at Dover, and a pro-Remain population in the North feeling alienation. Britain has benefited hugely from the EU, and the EU has benefitted from Britain’s membership, but British politicians for four decades have denied it and blamed Europe for everything that goes wrong and we now suffer the awful consequences.

UK’s BUSINESS RELOCATIONS
So, moving on to the second theme, British based firms trading with the EU now need to consider their location; they cannot wait until a possible car crash in 2019. There is nothing wrong with Ireland promoting itself aggressively to UK businesses looking to relocate – it is NOT an unfriendly act as some have suggested. The UK chose to leave the EU, and Ireland is fully entitled to promote itself. But you cannot set up regulated entities in Ireland and keep the “controlling brains” in London. The Central Bank quite rightly insists on Ireland-regulated firms being Ireland-controlled firms. Luxembourg has always offered brass plate facilities and will gain businesses but not lots of jobs.   Do not expect vast numbers of evacuees to arrive in Dublin, as Frankfurt and Paris will be the main job winners. But even a few thousand highly paid jobs arriving will generate knock-on economic activity. The one downside is that incoming firms will poach their senior staff from the large domestic firms and as they are not subject to the same pay constraints this will weaken our main national financial institutions.

Where Ireland could win serious amounts of new business activity is from inward overseas investment displaced from the UK. Britain will be a less attractive business location for firms seeking access to the EU and if you want an English style legal system and language, then Ireland must be your destination of choice. AIB is delighted to be the main bank supporting overseas business relocations into Ireland and we have a specialist team dedicated to it.

There is one additional potential benefit that I have not seen written about. Most large-scale EU financial transactions are written under UK law, great for the big City of London law firms. I cannot imagine that EU regulators will in the long-term permit offshore legal risk in the financial system. Given the proximity of Irish law to British law then I sometimes wonder whether there is an opportunity for Ireland to step in and offer what the British court system currently offers. Offering the EU what Delaware law offers the USA.

INFRASTRUCTURE IN IRELAND
The final leg of this session is infrastructure. I have yet to see any large city where the inhabitants think the infrastructure is adequate. New Yorkers think the subways are poor (they are!), Londoners think the roads are awful (they are!), and Berlin has a new airport disaster project trashing its reputation for efficiency. So, complaints about infrastructure are the natural order of things. Dublin has poor public transport, a small airport and inadequate housing stock. However, investment is going into the first two and the second runway is well timed. Housing though is still stalled and new home completions fall well short of demand. In AIB we have specialists looking at how we can support increased residential construction and it needs a concerted national effort to succeed.

Most road transportation to the European mainland via the UK is through Dublin and consideration is being given to increasing port facilities to accommodate customs delays. However, Dublin port is on a restricted site and any customs delays will overspill onto the city roads outside the port. Cork, Waterford and Rosslare offer possible future opportunities for additional direct routes to French, Belgian or Dutch channel ports. It will be interesting to see how British retailers trading in Ireland will affect their road transportation. Their transport cages can currently be loaded in UK warehouses and just delivered to Irish stores as they are within the UK, shelf ready for store replenishment. How this will work when customs checks are introduced for countries of origin and differential tariffs is an open question.

Ireland is well served by regional airports and there appears no shortage of runway capacity outside Dublin. However, the UK negotiators have identified the EU Open Skies arrangements as an area where they have negotiating leverage with the EU. In a car crash Brexit this arrangement cannot be guaranteed and dislocation of EU aviation is possible.   Ireland’s airlines are very alert to this risk.

We also need to consider the energy infrastructure. Currently 55% of Ireland’s natural gas is produced from the Corrib field but the rest comes from the UK. However, any dislocation to that would also affect Northern Ireland so a bad outcome is unlikely. On electricity, Ireland and Northern Ireland have operated a single electricity market since 2007 and this has generated economies of scale in generation and is covered by bilateral agreements. Thus, rationally Brexit should not be a risk to Ireland’s energy infrastructure. However irrational British siren calls to “take back control” from the EU is a risk, and there have been thoughts given to an electricity interconnector between Ireland and France and this would seem a very sensible contingency plan.

We also need to consider the built environment. Whilst foreign direct investment will be widely spread across the country, most relocations from the UK will be focused on Dublin.   Incomers will find it difficult to find homes, and the built environment shows the history of the Republic and is a potpourri compared to the more planned environments of say, Paris and Berlin.   Dublin is a low-rise city, and whilst this creates a charm and human scale, it also means that open spaces are small. Higher construction, sensitively located, would offer the opportunity for plazas providing more of an open feel at street level. Ireland has the opportunity to move into the Northern European mainstream and away from a perceived subsidiarity to the UK. Its new economic growth creates opportunities to carefully re-consider the role of planning in the built environment and to think through what a modern European capital city should be.

LANGUAGE EDUCATION PROGRAMMES
However, infrastructure is deeper than the obvious physical assets, there is also a human skill dimension. Brexit poses the question of how Ireland linguistically communicates with the EU without Britain as a member. Whilst English will always be the language of big international business, regional languages are the language of purely national firms and Ireland will need to build its trade with other nations than Britain. It has been very successful since 1973 in building trade links and diversifying from the UK, but this need increases after Brexit. I would suggest that language skills become more important and my sense is that Irish people, like the British, are largely indifferent to foreign languages. In the Nordic countries where I used to work, everyone seemed to be fluent in at least three main European languages, a huge advantage whenever we set up in a new country.   I pose the question: does Ireland need to boost its foreign language education programmes to maximise its opportunities in a re-shaped EU.

THE LONG TERM PRSPECTS FOR IRELAND REMAIN GOOD
The long-term prospects for Ireland in an EU, ex the UK, remain good. I just lament this completely unnecessary circus we are currently going through. And unless the British government get their act sorted out, then there is a risk of a serious short-term dislocation to trade, particularly in agriculture and fisheries. However, there are strong personal bonds between Britain and Ireland. They were strengthened during the period of common membership of the EU and will continue in the future; however, Ireland needs to develop new best friends within the EU and I would recommend the Nordic countries as excellent and reliable partners. But let me stress that the UK is still a wonderful place with some wonderful people, and that will not fundamentally change. Our cultural and family links will remain strong. I take some comfort from words attributed to Winston Churchill that “the British always do the right thing……. having exhausted all other possibilities”.

Last week I was reading Seamus Heaney’s “The Burial at Thebes” for a university course I am studying. I came across these words which struck me as applicable to those of us who want Britain to remain in the EU:

“Solidarity, friends,

Is what we need. The whole crew must close ranks.

The safety of our state depends on it.

Our trust. Our friendships. Our security.”

_________

 

 

 

 

 

 

 

 

 

 

THE LONG TERM PROSPECTS FOR IRELAND IN AN EU WITHOUT BRITAIN REMAIN GOOD

 

Richard Pym, Chairperson, Allied Irish Bank (AIB), former Group CEO of Alliance & Leicester

 

 

 

 

This paper covers three inter-related topics, Brexit, UK business relocations and Ireland’s infrastructure, and I will deal with each in turn.

 

The UK has a minority government, split on the terms of leaving the EU, coupled with an essentially pro-Remain legislature which must approve the legislation to leave. It is an unsatisfactory situation and the outcome entirely unpredictable. This minority government just does not have the bandwidth to create the replacement regulatory structures and policies by March 2019. Amongst this chaos we could easily end up with a hard, car-crash Brexit and it is also conceivable, although unlikely, that Britain could even Remain. For business planning purposes, you must assume that Britain crashes out without a deal.   Remember the British Prime Minister said, “no deal is better than a bad deal”, which is odd as surely “no deal” must be the “worst deal”. Whilst there are a few grown-ups in the British cabinet like Phillip Hammond, there are also those seemingly determined to continue adolescence beyond previous age boundaries, and for whom “no deal” would be victory. These are the people who dream of creating a new British-led world trade order described as Empire 2.0.

 

THE TWO POPULATIONS SEE EU MEMBERSHIP VERY DIFFERENTLY

Britain wants to leave the EU, leave the single market, leave the customs union, leave the ECJ, control freedom of movement, cease financial contributions and retain the benefits of membership. They want to buy something that isn’t for sale and hasn’t even been invented. This just isn’t going to work out well. I have a recurring nightmare of Marshall Foch’s railway carriage being dusted off for the signing of the British surrender in March 2019. Boris Johnson, sitting where representatives of the French government sat in June 1940, enjoying his cake with his afternoon tea; looking like Billy Bunter with cream on the end of his nose.

 

For the British, EU membership has coincided with national decline. The retreat from empire in the 40s, 50s and 60s was a decline of power which then continued with membership of the European Community. The British pay in and get nothing out: that is the perception. Very differently, for Ireland, membership has generated investment and modernisation, and sparked a national renewal. That is why the two populations see EU membership very differently: one sees decline, the other renewal.

 

Britain also sees Europe differently to Germany. Britain had a tough Second World War and whilst the civil population suffered, the pain of ordinary Germans was worse.   The levels of physical destruction of German cities and the fears of marauding Red Army soldiers were enormous. Read the autobiographical novel “Nightmare in Berlin” by Hans Fallada to feel the awful suffering of Berliners in 1945, the city population mass doping on morphine to ease the pain. Read the recent obituary of Helmut Kohl and of his first wife being raped by invading Russians at the age of 12 and then thrown out of a window.   Modern Britain has mercifully never suffered an invasion, but most of Central Europe has and sees the benefits of political integration. Britain might dislike the ECJ but it is much better in resolving disputes than a tank brigade. That is why the German Chancellor will put the European Union first, relations with Russia second and Brexit a distant third.

 

Whilst in Germany Brexit is not the main foreign policy issue, for Ireland it is. It has been described as the biggest crisis since the emergency in 1939. A car-crash Brexit leaves Ireland with customs duties on the border with the North, its trucks stuck in line behind British ones in a two- day queue at Dover, and a pro-Remain population in the North feeling alienation. Britain has benefited hugely from the EU, and the EU has benefitted from Britain’s membership, but British politicians for four decades have denied it and blamed Europe for everything that goes wrong and we now suffer the awful consequences.

 

 

UK’s BUSINESS RELOCATIONS

So, moving on to the second theme, British based firms trading with the EU now need to consider their location; they cannot wait until a possible car crash in 2019. There is nothing wrong with Ireland promoting itself aggressively to UK businesses looking to relocate – it is NOT an unfriendly act as some have suggested. The UK chose to leave the EU, and Ireland is fully entitled to promote itself. But you cannot set up regulated entities in Ireland and keep the “controlling brains” in London. The Central Bank quite rightly insists on Ireland-regulated firms being Ireland-controlled firms. Luxembourg has always offered brass plate facilities and will gain businesses but not lots of jobs.   Do not expect vast numbers of evacuees to arrive in Dublin, as Frankfurt and Paris will be the main job winners. But even a few thousand highly paid jobs arriving will generate knock-on economic activity. The one downside is that incoming firms will poach their senior staff from the large domestic firms and as they are not subject to the same pay constraints this will weaken our main national financial institutions.

 

Where Ireland could win serious amounts of new business activity is from inward overseas investment displaced from the UK. Britain will be a less attractive business location for firms seeking access to the EU and if you want an English style legal system and language, then Ireland must be your destination of choice. AIB is delighted to be the main bank supporting overseas business relocations into Ireland and we have a specialist team dedicated to it.

 

There is one additional potential benefit that I have not seen written about. Most large-scale EU financial transactions are written under UK law, great for the big City of London law firms. I cannot imagine that EU regulators will in the long-term permit offshore legal risk in the financial system. Given the proximity of Irish law to British law then I sometimes wonder whether there is an opportunity for Ireland to step in and offer what the British court system currently offers. Offering the EU what Delaware law offers the USA.

 

INFRASTRUCTURE IN IRELAND

The final leg of this session is infrastructure. I have yet to see any large city where the inhabitants think the infrastructure is adequate. New Yorkers think the subways are poor (they are!), Londoners think the roads are awful (they are!), and Berlin has a new airport disaster project trashing its reputation for efficiency. So, complaints about infrastructure are the natural order of things. Dublin has poor public transport, a small airport and inadequate housing stock. However, investment is going into the first two and the second runway is well timed. Housing though is still stalled and new home completions fall well short of demand. In AIB we have specialists looking at how we can support increased residential construction and it needs a concerted national effort to succeed.

 

Most road transportation to the European mainland via the UK is through Dublin and consideration is being given to increasing port facilities to accommodate customs delays. However, Dublin port is on a restricted site and any customs delays will overspill onto the city roads outside the port. Cork, Waterford and Rosslare offer possible future opportunities for additional direct routes to French, Belgian or Dutch channel ports. It will be interesting to see how British retailers trading in Ireland will affect their road transportation. Their transport cages can currently be loaded in UK warehouses and just delivered to Irish stores as they are within the UK, shelf ready for store replenishment. How this will work when customs checks are introduced for countries of origin and differential tariffs is an open question.

 

Ireland is well served by regional airports and there appears no shortage of runway capacity outside Dublin. However, the UK negotiators have identified the EU Open Skies arrangements as an area where they have negotiating leverage with the EU. In a car crash Brexit this arrangement cannot be guaranteed and dislocation of EU aviation is possible.   Ireland’s airlines are very alert to this risk.

 

We also need to consider the energy infrastructure. Currently 55% of Ireland’s natural gas is produced from the Corrib field but the rest comes from the UK. However, any dislocation to that would also affect Northern Ireland so a bad outcome is unlikely. On electricity, Ireland and Northern Ireland have operated a single electricity market since 2007 and this has generated economies of scale in generation and is covered by bilateral agreements. Thus, rationally Brexit should not be a risk to Ireland’s energy infrastructure. However irrational British siren calls to “take back control” from the EU is a risk, and there have been thoughts given to an electricity interconnector between Ireland and France and this would seem a very sensible contingency plan.

 

We also need to consider the built environment. Whilst foreign direct investment will be widely spread across the country, most relocations from the UK will be focused on Dublin.   Incomers will find it difficult to find homes, and the built environment shows the history of the Republic and is a potpourri compared to the more planned environments of say, Paris and Berlin.   Dublin is a low-rise city, and whilst this creates a charm and human scale, it also means that open spaces are small. Higher construction, sensitively located, would offer the opportunity for plazas providing more of an open feel at street level. Ireland has the opportunity to move into the Northern European mainstream and away from a perceived subsidiarity to the UK. Its new economic growth creates opportunities to carefully re-consider the role of planning in the built environment and to think through what a modern European capital city should be.

 

LANGUAGE EDUCATION PROGRAMMES

However, infrastructure is deeper than the obvious physical assets, there is also a human skill dimension. Brexit poses the question of how Ireland linguistically communicates with the EU without Britain as a member. Whilst English will always be the language of big international business, regional languages are the language of purely national firms and Ireland will need to build its trade with other nations than Britain. It has been very successful since 1973 in building trade links and diversifying from the UK, but this need increases after Brexit. I would suggest that language skills become more important and my sense is that Irish people, like the British, are largely indifferent to foreign languages. In the Nordic countries where I used to work, everyone seemed to be fluent in at least three main European languages, a huge advantage whenever we set up in a new country.   I pose the question: does Ireland need to boost its foreign language education programmes to maximise its opportunities in a re-shaped EU.

 

 

THE LONG TERM PRSPECTS FOR IRELAND REMAIN GOOD

The long-term prospects for Ireland in an EU, ex the UK, remain good. I just lament this completely unnecessary circus we are currently going through. And unless the British government get their act sorted out, then there is a risk of a serious short-term dislocation to trade, particularly in agriculture and fisheries. However, there are strong personal bonds between Britain and Ireland. They were strengthened during the period of common membership of the EU and will continue in the future; however, Ireland needs to develop new best friends within the EU and I would recommend the Nordic countries as excellent and reliable partners. But let me stress that the UK is still a wonderful place with some wonderful people, and that will not fundamentally change. Our cultural and family links will remain strong. I take some comfort from words attributed to Winston Churchill that “the British always do the right thing……. having exhausted all other possibilities”.

 

Last week I was reading Seamus Heaney’s “The Burial at Thebes” for a university course I am studying. I came across these words which struck me as applicable to those of us who want Britain to remain in the EU:

“Solidarity, friends,

Is what we need. The whole crew must close ranks.

The safety of our state depends on it.

Our trust. Our friendships. Our security.”

 

 

 

 

 

 

 

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