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could take two years (possibly longer) to nalise.
What would happen to Ireland in the event of a Brexit? In the near term, we would likely see further downside pressure on sterling, which would be negative for Irish
(as Ireland would be the largest English-speaking coun- try left in the EU in the event of a UK departure) and the possibility that some nancial services activities could relocate from ‘The City’ to Dublin’s IFSC. Comparable UN data show that Ireland attracted the fth highest FDI in ows of the 28 member states of the EU over the six years to end-2014, so this country has a proven track record of punching above its weight.
exporters to the UK.
While the UK accounts for 14% of aggregate Irish
goods exports, a detailed examination of trade data re- veals that a number of sectors are particularly exposed to our near neighbour. Nearly 40% of Food exports went to GB in 2015, with other large shares recorded by the likes of Beverages & Tobacco (19%); Manufactured Goods (43%) and Machinery & Transport Equipment (16%).
With that being said, we would consider this to be mere speculation at this juncture. As noted above, we don’t know how a ‘Brexit’ would impact the UK’s rela- tionship with the ‘rump-EU’. While some have mused that a UK exit could result in punitive tariffs being im- posed by Brussels, this seems fanciful given the former’s importance to the rest of the EU – the UK ran a mer- chandise trade de cit of £88.7bn with the rest of the EU in 2015.
On the services side, the latest available annual data (for 2014) show that Irish services exports to the UK in that year totalled €20.2bn (20% of total services ex- ports). We expect that this has grown since then, giv- en the strong performance by services exports in 2015 (+15% y/y in nominal terms). As with the goods sector, Irish services exports are dominated by multinationals, but areas such as Tourism and Transport would be dam- aged by a further sterling softening.
However, we don’t see Brexit happening. Assuming that we are right, this should lead to a strengthening of sterling after the referendum and Ireland’s current ex- port headwind from the pound will then give way to a tailwind.
Might there be any bene ts to Ireland from a Brexit? There has been speculation in some quarters about the potential bene ts that would accrue in terms of FDI wins
Philip O’Sullivan is Chief Economist with
Investec Ireland
We don’t know how a ‘Brexit’ would impact the UK’s relationship with the ‘rump-EU’
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