The quality of Brexit is not strained

Image: Stockfresh

28 September 2018

Billy MacInnesI’m intrigued by the optimism on show from Irish IT companies with UK subsidiaries or operations in the face of so many downbeat assessments of the UK market post-Brexit. I’m not going to reiterate all the economic forecasts predicting declines in the performance of the UK market in the event of any Brexit deal, hard, soft, blind or no. Nor will I dwell on similar studies that expect Brexit to have a detrimental effect on the Irish economy.

I’m not going to do that because it seems that, whatever their counterparts in areas like agriculture might feel, Irish IT businesses aren’t dwelling on it much either. Last week, for example, after announcing the acquisition of Zinopy Security, Trilogy Technologies managing director Edel Creely said it was “well placed to take advantage of the significant growth opportunities in managed IT services domestically and in the much larger UK market, where we now have new opportunities to build on our existing footprint”.

Similarly, a few days later, announcing plans to create 15 roles and increase turnover to €5 million over the next three years, Envisage Cloud managing director Peter Bergin stated: “The UK presents major possibilities for us and so growing our sales presence in this market is a core ambition as we seek to grow demand and customers.”

While there can be no doubt that the “much larger UK market”, can provide “significant growth opportunities” and “major possibilities”, what happens after 29 March 2019 will have a major bearing on how significant they will be. At present, it’s difficult to see why Irish businesses engaging in the UK market are as optimistic about the post-Brexit landscape as they appear to be.

It may well be that it’s not so much a demonstration of optimism as pragmatism. If Brexit proves to be as messy and shambolic as the build up has been, it probably makes sense to have an operation in place in the UK rather than try to service the market from Ireland given all the trading barriers that could suddenly emerge.

But Brexit is also likely to create barriers between Irish companies and their UK subsidiaries/operations, barriers that are likely to raise costs while increasing bureaucracy and administration.

And when it comes to services, there are all kinds of uncertainties at play. For example, a report published in December last year by Technology Ireland, the Ibec group representing the technology sector, stated: “Services form an important element of the Irish technology sector supply chain. In the event of a hard Brexit the WTO/MFN terms provide far less certainty and security of access for services. It is essential that any transition arrangements provide for trade in services, not just trade in goods.”

So it’s probably worth noting here that the only deal the UK government has put on the table to date makes no provision for services whatsoever.

I can appreciate that many business people, including leaders of IT companies, have an innate belief that politicians will, when push comes to shove, behave in a rational way and not cause undue economic harm in their pursuit of a particular ideal or goal.

This may prove to be an over-optimistic view when it comes to Brexit. Some of the most high profile supporters of Brexit have a quasi-religious fanaticism about it. In their desire for Brexit and to free themselves from the shackles of the EU, they dismiss and denigrate any evidence that it will cause harm to the country. It is a holy grail that must be pursued at all costs. Any casualties arising from Brexit will be a sacrifice worth paying to achieve that goal.

Those of us outside the UK might expect common sense to prevail when it comes to how that country leaves the common market. There is no guarantee that it will.

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