Trigger pulled, target uncertain

(Image: Stockfresh)

10 April 2017

Paul HearnsSo, it begins.

The UK government, on 20 March, confirmed the triggering of Article 50 of the EU treaty on 29 March 2017.

Within minutes of the UK announcement, Donald Tusk, EU Council president responded with a tweet:

“Within 48 hours of the UK triggering Article 50, I will present the draft #Brexit guidelines to the EU27 Member States.”

And so, the much talked about timetable has been confirmed and soon the real work will begin.

“One expected outcome of Brexit was a rush of financial services companies fleeing the UK for Dublin. While this has been talked about, and tentatively commented upon by the Central Bank, some 10 or so insurers and the Bank of China opening an Irish branch hardly constitutes an exodus”

However, there is still so much uncertainty that even this clarification will do little to clear the muddy waters of implications, impacts and outcomes.

Impact assessment
Just recently, David Davis MP, secretary for Brexit, confirmed in front of a House of Commons select committee on exiting the EU, that the UK government had not assessed the impact for Britain of leaving the EU without a fully negotiated trade deal.

Added to this was the announcement by Scottish first minister Nicola Sturgeon of her intent to call for another Scottish independence referendum, and the stakes are ratcheted ever higher, making all that speculation in the fog even more intriguing.

On meeting the embattled US president Donald J Trump, an Taoiseach Enda Kenny was asked about the bad old days of a hard border between the Irish Republic and Northern Ireland. For such an issue to be a preoccupation, or even a dot on the radar, of such a notorious flibbertigibbet attests to the level of classic FUD—fear, uncertainty and doubt that abounds around Brexit.

With what was probably a primed release waiting on the UK government announcement, it was announced that Minister for Jobs, Enterprise and Innovation, Mary Mitchell O’Connor, TD, will travel to the Hague to meet two of senior EU counterparts, Minister Henk Kamp, Minister for Economic Affairs and Minister Lilianne Ploumen, Minister for Foreign Trade and Development Cooperation in the Hague.

Minister Mitchell O’Connor said she will “stress the importance of the Brexit negotiations taking full account of the impact on Ireland in relation to the economic and employment context, our desire to minimise the impact of any potential customs controls, and the competitiveness challenge”.

Much has been said of the potential impact for Ireland of Brexit, whether it be hard, soft, or just right for the UK, as Prime Minister May puts it.

Expected outcomes
One expected outcome was a rush of financial services companies fleeing the UK for Dublin. While this has been talked about, and tentatively commented upon by the Central Bank, some 10 or so insurers and the Bank of China opening an Irish branch hardly constitutes an exodus.

In fact, one senior officer in a global bank based in London told me that Frankfurt was far more likely to receive the exodus from the UK, as there was speculation over Ireland’s future in the EU, for more reasons than Brexit, and that any such move out of London should be the last. Therefore, it was more pragmatic to make that move to Frankfurt than to Dublin. While this is entirely anecdotal, it nonetheless shows that there are variances at every level, from every perspective, on what Brexit means for each sector, and for the economic landscape overall.

Looking specifically at the tech industry, there are interesting points to note.

Firstly, some organisations appear to be hedging bets by ensuring that their data centre infrastructure is up to a potential shift in traffic or data storage needs to within the EU, as characterised by the building of new data centres here, in the Netherlands and Germany, to name but a few.

This is one area where uncertainty is ever so slightly less, as the implications for data flows between the UK and the EU would need to be governed by GDPR in any case. Therefore, UK firms will be just as likely to struggle with, but ultimately implement, GDPR by the common deadline and exercise it going forward in processing EU data.

That fact should make dealing with both UK companies and the UK market easier for Irish companies, as there will be a certain uniformity to data practices as a result of the common adherence to regulation.

Tech sector
One impact area for the tech sector here might be for those companies that have either acquired or established significant UK operations in the last few years. The likes of CMS Distribution and Trilogy Technologies may be at the coalface of the new order, as they straddle both the technology and business challenges of a non-EU UK. Everything from import and export criteria, data flows, support services and personnel movement will be daily issues until the situation becomes clear.

A major point of the Brexiters was around immigration controls and it would seem that this will be a central bone of contention in negotiations. The EU has repeatedly stated that single market access will be linked to free movement of labour. The tech sector relies on a free flow of skilled workers, especially when it comes to start-ups, and the global nature of larger services companies, whether serving social networks or professional support services, means that multi-lingual workers will be in even higher demand. Even if the movement of the highly skilled is not immediately curtailed, there may be implications in the long run as the inevitable exit by some companies will either leave a shrinking, or at the very least highly disrupted, jobs market that might take some time to stabilise.

So where does that leave the tech sector in Ireland? Well, in the shorter term, even as the deal is negotiated, there may not be too much disruption, beyond the already experienced currency volatility. This may impact with the likes of the big vendors who tend to pick an exchange rate, fix it at the start of a fiscal year and the brazenly apply it, irrespective of how ridiculous it might become through the year. Irish companies may or may not benefit in such cases, but usually, they do not.

Skill influx
We may well see more of an influx of skilled workers than we do of tech companies, and the recent announcements by the likes of Accenture on its blockchain development group here may actually attract fintech refugees from the UK. Beyond that, it is very hard to say and the companies named above and others in similar circumstances may become bellwethers for what is going on and be the ones to watch.

However, despite the naming of the date for pulling the trigger, the trajectory of the Brexit bullet is still far from certain, nor indeed, is its intended target.



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