This briefing first appeared in The Lawyer 'Life after Brexit' Ireland Report, October 2019.
Last year, in a similar briefing for The Lawyer, I explained what I saw as a compelling business case for investment in Ireland in the context of Brexit. Based on Ireland’s continuing strong recovery from last decade’s recession, I outline reasons for continued confidence and investment in its economy.
Recovery and growth
Over the past 20 years, Ireland has demonstrated a willingness to recognise, adjust to and overcome economic challenges. The support of the EU (through the European Commission and the European Central Bank) and the international community (through the International Monetary Fund), enabled it to make the necessary adjustments to recover from the recession.
Ireland was able to make a rapid recovery and return to being Europe’s fastest-growing economy. The UK was particularly supportive in economic terms and with Ireland’s negotiations with the EU. This reflected our strong economic and close geographic, historic and cultural connections with the EU. Despite Brexit, the Irish government has reaffirmed that its close connections with the UK will continue, but it will remain in the EU.
As the next Brexit date draws closer, the challenge for business continues to be uncertainty – the need to prepare for both a ‘hard’ and ‘soft’ Brexit – without the precise legal detail of what will result from a ‘hard’ Brexit.
The country is taking a pragmatic approach, seeking to preserve the political and economic benefits for the island of Ireland which have been part of the peace dividend since the late 1990s. It also respects the UK’s autonomy to determine how it handles Brexit, preserving solidarity of approach to Brexit with the remaining EU states and has prepared for the likelihood of a ‘hard’ Brexit (for example, the 2019 Budget is based on a ‘hard’ Brexit scenario).
Ireland’s economy continues to perform strongly, despite Brexit. The 2018 forecasts for 4.7 per cent growth increased to actual GDP growth of 6.7 per cent and 2019 forecasts have been revised from 4.2 per cent to 4.7 per cent. The Central Bank of Ireland’s July 2019 commentary is that this growth is supported by the buoyancy of domestic economic activity and strong growth in exports, despite rising uncertainty about economic prospects and increasing external headwinds.
A fundamental driver of successful growth has been the country’s long-term policy of attracting foreign direct investment and provision of a flexible open market. The key elements underpinning this success remain in place – certain access to the EU market; a well-developed business and legal system; a young, skilled, well-educated, English-speaking workforce; and an attractive, transparent tax regime for business.
Foreign direct investment jumped 52 per cent in 2018, according to the EY Attractiveness Survey Europe, while IDA Ireland confirmed that more than half of the 265 new investment projects announced in 2018 featured first-time investors.
This activity is also reflected in M&A transactions across all sectors, with strong continuing investment from the US, the UK and the EU. Compared to 2018, deal values increased and deal volumes dropped for the first half of 2019. Private equity increased significantly. Technology, media and telecoms, property, pharma and financial services were the most active sectors (consistent with recent years).
Key trends are of significantly increased investment in the Irish economy, despite heightened levels of international risk and uncertainty. Turmoil caused by Brexit seems to have made Ireland a more attractive option, with anecdotal evidence revealing that at least 100 businesses have relocated to Dublin because of Brexit.
The economic conditions, policy platforms and positive approach which supported the growth and recovery of the Irish economy since 2013 remain in place. Over the past five years, buoyant economic conditions offer hope that growth can continue in Ireland, despite international and local economic headwinds. Investment and deal activity remains robust and there is an awareness that the mistakes from the early 2000s will not be repeated. Just like our rugby team, our economy has learnt hard lessons from recent challenges, has adjusted and is determined to deliver on its potential.