The Economic Impact Of Brexit On Ireland
Unfortunately, most of the current reporting concerning the Brexit crisis has focused on a political coverage of events in the UK. To a certain extent this is understandable in the light of Theresa May’s recent failure to push her “soft exit” deal through Parliament. But the latest reports also indicate that UK finance companies are deeply concerned about “economic instability” caused by a seemingly endless Brexit chaos.
While there has been some coverage of the Brexit crisis on Ireland, most of it has been in the form of political/diplomatic analysis concerning Northern Ireland. The “Irish Backstop,” the Democratic Unionist Party (DUP), and a possible dissolution of the Good Friday Agreement dominate the headlines. Little attention has been paid to the economic impact of the current situation on the Irish Republic.
According to the latest reporting, the British finance industry has shifted large sums of money and personnel from London to competing EU financial centers. These London financiers are spending billions of dollars to shift their staffs and assets to outposts all across Europe. As a result, Europe’s financial system has been fundamentally altered. Yet this financial shift of resources has been largely ignored by the media.
Hundreds of billions of dollars, as well thousands of staff jobs and administrative positions have been moved to secondary finance centers in Frankfurt, Paris and Dublin. The Bank of America, Chase, J.P. Morgan and UBS are among those diversifying their assets. Barclay’s PLC has turned a former backwater subsidiary in Dublin into its largest bank by assets. One of the bank’s managers stated: “Dublin is our headquarters for our European banking now. Full stop!”
More specifically, Barclay’s shifted $213 billion worth of assets out of London into its new EU banking hub in Ireland. In addition, Bank of America which was pulling out of its Dublin subsidiary, has done a U-turn, shifting 50 billion in assets back to Dublin, which will hire approximately 800 employees; 80% of them Irish. This will further reduce the Irish unemployment rate which has dropped from 5.7% in 2018 to 5.6% in 2019.
These shifts in capital entail huge staffing and local hiring issues. As a result, an army of consultants is now helping UK companies prepare for any unintended Brexit consequences. Moreover, there is pressure to employ cheaper local (Irish) employees for back office jobs including accountants, contractors and freelancers. In the short run, this is good news for the overall Irish economy.
In the long run however, a “hard exit” by the UK from the EU could cause serious economic problems for Ireland. Britain and Ireland are economically joined at the hip; the UK is still Ireland’s main trading partner. If the British economy suffers from Brexit, that lucrative trade relationship will be damaged. Simply put, what’s good for the UK’s economy is also good for Ireland. Hopefully, the Brexit has a soft landing.
Dan Fitz-Simons is a retired U.S. government analyst and former contractor for General Dynamics. He is currently working as a freelance consultant with Accounting Pro, which has offices in Limerick and London.
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