People in Northern Ireland have particular reason to be preoccupied by the potential effects of a Brexit, but the Republic, too, could have a great deal riding on the result. Unlike the Scottish independence referendum, on which the Government maintained a studied silence, Irish Ministers have been vocal in arguing that a Brexit would damage Ireland’s interests.
First, the UK is by some distance the Republic’s largest trading partner, accounting for 43 per cent of exports by Southern firms in 2012. “The key question for us would be the future trading relationship between Britain and the European Union,” says a senior official. If the UK cut itself off from the EU – a market of 500 million people with a combined GDP of €13.5 trillion – Britain would be a far less attractive place for foreign firms to invest in. Research cited by Edgar Morgenroth of the Economic and Social Research Institute shows that EU membership increases foreign direct investment from outside the EU by 27 per cent.
Second, the two countries’ energy markets are deeply entwined: Ireland imports 89 per cent of its oil products and 93 per cent of its gas from its nearest neighbour. A UK departure could put more pressure on Dublin to raise its corporate tax rate, for example. More generally, the balance of power within the EU would shift to the south and the east, where Ireland has few natural allies on strategically important issues.
Britain is in the middle of something so epic that almost everyone feels compelled to have a view on it. And like a Rorschach test, both right and left gaze upon the saltires and the protesting crowds outside BBC Scotland – and see exactly what they want to see. Scotland has already changed. For too long it lagged behind the UK’s economic performance. But the most recent growth figures confirm that recession, while deeply damaging, was both shorter and shallower than in the UK as a whole. Scotland continues to attract companies such as Samsung, Amazon, Mitsubishi, Michelin, Gamesa and Avaloq, and generates more employment through foreign direct investment than other parts of the UK, according to Ernst & Young. With greater economic powers, even more could be done to step up their economic performance.
Independent analysis does not support the argument that Scotland cannot sustain itself. In fact, according to the Centre for Public Policy for the Regions, official UK government figures show that in each of the past five years Scotland’s fiscal balance has been as good as, or better than the UK’s and that advantage will continue. Within that fiscal flexibility is the prize that independence offers: the ability to make judgements that are appropriate to the circumstances of the Scottish economy, tailoring policies to boost our long-term competitiveness. Independence would allow us to maximise the opportunities available to our businesses and our people, to give certainty about the tax environment to our oil and gas industry, to set competitive levels of corporation tax and to encourage those industries with which Scotland already enjoys competitive advantage.
The Government sees the Brexit referendum as one of the biggest risks that Ireland faces in 2016. A unit has been set up at the Department of the Taoiseach to co-ordinate efforts, and the Embassy in London and diplomatic network around Europe will lead a drive to explain Irish concerns. A particular focus of the public information campaign will be on the 600,000 Irish-born people now living in Britain and the two to three million second-generation Irish. It is argued that the combined economies of Northern Ireland and the Republic could grow by more than €30bn if Ireland reunified, with the bulk of the benefits accruing north of the border. If the economy of Northern Ireland adopted the Republic’s tax regime and the euro, the resulting productivity increases and lower cost of trade could cause the province’s economic output per head to rise by as much as 7.5 per cent, according to KLC Consulting, which was compiled by academics in Canada and Europe.
Kurt Hubner High said the report — Modelling Irish Unification — “is not a how-to manual for Irish unification”. But he said it was the first detailed examination of the economic potential of unification, and was based on similar studies of the reunification of Germany and of the potential impact of the reunification of Korea. The report concludes that the combined gross domestic product of both economies could expand by €35bn in the first eight years after reunification. The GDP of the Republic was €203bn at the end of 2015, while the economy of Northern Ireland is worth about £35bn/€42bn.
The latest report signalled that growth was maintained at the end of the second quarter, with sharper expansions of output, new orders and employment recorded. However, Ulster Bank chief economist Richard Ramsey said economists have slashed their growth forecasts for the UK economy: Is this a precedent for years to come?
Whatever your view on moving forward, the modern pocket will no doubt lead the way, before politics unites us, our finances will. No doubt this will also bridge the gap between economic Unionists and Nationalists.
By Kieran Cairns