Thursday, March 9, 2017
Some weeks ago, I wrote a short blog about the certainty and stability of the business environment in Ireland and the legal structures associated with that environment. That blog was a view based on current and previous facts in play. Now the Irish government in launching “Ireland Connected: Trading and Investing in a Dynamic World” (or “Ireland Connected”) has set out Ireland’s future trade strategy which, amongst several other matters, plots out Ireland’s strategy to address issues arising from Brexit.
Whilst there are many ambitious targets set out in the strategy and it is tempting to discount them as such, it is worth bearing in mind that many of the targets set forth in the previous “Trade, Tourism and Investment Strategy” which ran from 2010 – 2015 were achieved and in some instances, significantly exceeded. In the course of the previous strategy:
The three sources of data above have been selected because they all bear particular relevance to how experts believe that Brexit might impact Ireland. In particular, the UK is the largest single market for Irish exports accounting for 40% of total Irish exports (with the Irish agri-foods sector substantially higher). It is also predicted that Brexit will reduce the total numbers employed in Ireland by 2% which will have knock on effects to unemployment.
With this in mind, it is rather unsurprising that the Ireland Connected strategy concentrates on 3 core strategies as follows:
1. Diversification and intensification
The strategy aims to diversify 80% of indigenous export growth to be outside of the UK. This process has already begun and deals to secure the export of Irish products to new markets have already been secured – Irish beef to Saudi Arabia by way of example. There is also a target to maintain exports to the UK at existing levels – so whilst the plan to diversify marks a new step, the UK remains a very key part of the strategy regardless of whether Brexit is hard or soft.
On the intensification side of the equation, there is a core focus to continue to develop Ireland as a venue for both indigenous Irish companies and international companies to base research and development activities and to scale.
Research and development investment spend by Irish indigenous companies is targeted to grow by 50% during the lifetime of the Ireland Connected strategy. With the Irish Knowledge Development Box tax regime in place (income derived from qualifying R&D activity is taxed at 6.25%) together with a third level system working closely with business, Ireland already has an established and flourishing R&D ecosystem.
2. Foreign direct investment and immigration
The strategy plans to target 900 new foreign direct investment projects in the period 2015 – 2019. In reality, this number is likely to be very significantly exceeded as businesses currently structured into Europe from the UK are increasingly looking to hedge against Brexit by structuring parts of those businesses elsewhere throughout the EU, with many looking to do this through Ireland. At the top end of the trend, there have already been some significant announcements by certain international players (e.g. Barclays), but the more significant activity that is currently being seen is in the mid-market.
Another interesting aspect of this strategy is to specifically target and increase international student numbers by 27% to reach 176,500 by the academic year 2019/2020. This is a very marked contrast to the UK where there is a move to reducing foreign student numbers.
3. Consistent communication
This is perhaps one of the more attractive messages that is emanating from Ireland and the importance of consistent communications is specifically highlighted in Ireland Connected. In a world of ever increasing populism and extremism, the Irish message is remarkably consistent, even mature, by way of contrast. Indeed, if the Ireland Connected strategy is compared to the previous Trade, Tourism and Investment Strategy, the only significant headline distinction is the greater emphasis on diversification away from excessive export reliance on the UK. And of course, the corporate tax rate has been set in stone at 12.5% since 2003.
In overall terms the clear and consistent principles which have long since been the mainstay of the Irish economy remain as before i.e. foreign direct investment, innovation and access to the freedoms of the EU. The focus will be to wean the export sector of the Irish economy away from over reliance on the UK, whilst finding new ways to maintain and sustain long term trading with the UK. The message of Ireland Connected to business is that if you want consistency in a changing world, you should consider Ireland.