While the start of a new year generally brings optimism, Brexit and the election of Donald Trump have changed the landscape a little.
As our closest neighbour, the UK’s decision to leave the EU will undoubtedly affect Ireland. After news of Brexit spread, the Construction Industry Federation (CIF) issued a statement expressing concern that the decision would likely see some reduction in GDP in Ireland.
The Federation called on the Irish Government to engage with the UK and the EU to ensure that as much certainty as possible was brought into the process. Information on the UK’s next steps and the timeframes involved were, said the CIF, vital for Irish construction businesses to measure risks in the coming months.
Calls were also made to make the public capital programme a priority, stating that “the positive impact of investment in infrastructure is one of the only economic certainties in this current period of uncertainty”.
Uncertainty seems to be the word most associated with Brexit and its impact on the construction industry and, in turn, the electrical industry.
Electrical contractors operating in Great Britain, Northern Ireland and the Republic of Ireland have already been affected by a Brexit slowdown.
A significant number of companies have also said they were proactively changing their business strategy to adapt to the new economic reality of Brexit, with most saying that the major impact of Brexit would not be felt for several years.
Almost all companies also agree that strict border controls and trade restrictions between the UK and the Republic of Ireland would be extremely negative for the sector and its ability to work across jurisdictions.
Despite these reports, several industry commentators have talked about the resilience of Irish firms who have worked in the UK construction industry for years. Their ability to adapt will, they say, help them weather the uncertainty of how a separation of the UK from the EU will work in practice.
Reassuring as this viewpoint may be, it’s also true that, for businesses operating across the island of Ireland, the cross-border implications are especially uncertain. The additional compliance that may be required on cross-border trade as well as the freedom to move staff between Ireland and the UK/Northern Ireland is also unknown, making strategic planning virtually impossible, particularly for SMEs.
Volatile currency markets have also led to a decline in Irish exports to the UK, while Irish imports from Britain also slowed between January and the end of April, reducing by €116million compared to the same period last year. The ability of Irish businesses to remain competitive has also been threatened by fluctuations in currency. Some companies have already reduced their product prices in order to compete in the UK market.
We won’t see the real impact of Brexit until the withdrawal agreement is finally signed but, according to some, it may not be all bad news for Ireland. Industry commentators such as Grant Thornton have stated that Ireland and, in particular, Dublin may benefit from FDI that would normally go to London.
If more financial firms decide to relocate to Dublin due to the uncertain environment created by Brexit in the UK, a larger number of Grade A offices in central business districts will be required. However, this additional work would be dependent on a new Government strategy that would allow the construction industry to deliver the housing and infrastructural needs of these organisations. It has also been suggested that our skills crisis may be helped if construction slows down in the UK and skilled workers begin to consider Ireland a more favourable place to work.
We may not know the ins and outs just yet, but it’s certain that Brexit will have an effect on our construction sector.
The impact that President Trump may have is less clear. Some experts have warned that Trump’s determination to reduce US corporation tax rates from 35% to 15%, a figure close to the Irish rate of 12.5%, may have an impact on multinationals currently in Ireland. Indeed, one of Trump’s top advisers has warned that a “flood of companies” will leave Ireland under the President’s planned new tax regime. This will have a direct impact on the facilities being built here, like for example, data centres.
Trump’s views on free trade may also mean the defeat of the Transatlantic Trade and Investment Partnership (TTIP), a series of trade deals between the EU and the US, along with the Trans-Pacific Partnership.
A trade and investment agreement between the world’s two most important economic powers would give a strong boost to our economies and create jobs on both sides of the Atlantic; without it, free trade will become difficult, if not impossible.
This potential move to a protectionist era could affect Irish export growth in the years ahead to one of our key markets.
2017 and beyond will see the real impact of changes created by Brexit and the election of Trump as POTUS. Our economic landscape has completely changed; now is the time for Irish businesses to inform and educate themselves to ensure that they’re ready to face the challenges that lie ahead.