brexit Archives - P F Power & Co. Accountants

Tough Brexit talk fuels sharp drop in sterling

Tough Brexit talk fuels sharp drop in sterling
Sterling fell sharply yesterday as both candidates to become UK prime minister talked up their willingness to execute a hard Brexit during Conservative Party leadership debates.

On the eve of the Brexit referendum, it cost 76.5 pence to buy one euro. Now, with a hard Brexit fast approaching, a euro costs 90.22p and sterling looks set for further decline.

The Central Bank of Ireland said earlier this year that a hard Brexit could push the euro to 97p, and some economists have warned that parity – a one-for-one euro-sterling exchange rate – is a real possibility. Betting odds put Boris Johnson, who has said he could walk away without a deal, as 95pc certain to become Britain’s next prime minister, although the same odds show a 55pc chance the UK will still be an EU member at the end of this year.

Erik Norland, chief economist at the CME Group, the world’s biggest derivatives exchange, said sterling could be in for a dramatic autumn as the October 31 Brexit deadline looms.

“In other words, the downside potential for the pound becomes more acute as we enter the fall months,” Mr Norland wrote in a research report.

While the pound has fallen to levels not seen since 2017 against the dollar, hitting $1.2418 yesterday, it has traded weaker than 90p to the euro much more recently, and its move to 90.38p was the weakest since January this year. Even with signs of relative strength in the UK economy, which the European Commission expects to grow by 1.3pc this year and so outperform Germany, the pound has been weighed down by Brexit.

Any sharp moves in the pound and a fall towards parity will magnify the economic impact here.

Ryanair and the ferry operator Irish Continental have already warned of the impact of Brexit, and even though a weaker pound would push inflation here lower in the short term, there is a risk that the negative supply shock could cause prices to push higher, eroding wage gains in Ireland.

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No-deal Brexit could result in higher taxes for online shoppers

No-deal Brexit could result in higher taxes for online shoppers

Minister of State for European Affairs Helen McEntee has said a no-deal Brexit could result in higher taxes for online shoppers and difficulties in returning goods, as the UK would no longer be subject to the same consumer rights and protections.

Speaking on RTÉ’s Morning Ireland, Ms McEntee said: “If the UK leaves with no deal, in terms of retail they will become a third country, in the same way that you’re dealing with the US or other third countries. There may be possible tax implications.

“Also, and I don’t do it myself, but I know plenty of people who might order five or six dresses, they get them, they try them on and they send a few back. If you’ve already paid taxes on them, how do you negate that?

“You’ve also got the fact that they will no longer be under the same consumer protections and rights.”

Ms McEntee said the situation is “is not going to be as good as we have now” and will cause the economy to slow down, cause the seamless flow of the all-Ireland economy to slow down and cost people their livelihoods.

She described yesterday’s report on Brexit preparations as “damage limitation” and said while the Government did not want to scare people it wanted to prepare them for the “significant challenge” ahead.

Ms McEntee also urged any motorists who live in Ireland and hold a UK driving licence to switch it over before 31 October, as drivers will need an up-to-date licence.

The Government, she said, is doing all it can to prepare for a no-deal Brexit, but admitted that “we’re not fully there yet”.

Ms McEntee could not say where checks on goods crossing the border will be, but said that meetings on the issue will continue over the summer.

She said there were many businesses who have not yet engaged and Government was trying to reach out to help them prepare for a no-deal Brexit.

Meanwhile, Fianna Fáil’s Brexit spokesperson said the Government needs to help small and medium businesses get prepared for Brexit.

Also speaking on Morning Ireland, Lisa Chambers said that the “cliff edge” is getting very close.

She added that the Government’s warnings yesterday were dire but nothing new, and she would have expected to hear about new plans from the Government yesterday also.

Ms Chambers said it is worrying that 40,000 businesses who trade with the UK have not yet registered with Revenue.

She said the Government needed to be more proactive in reaching out to those smaller businesses and hauliers and needed to work closely with these businesses to help them get ready, pointing out that they employ a large amount of people.

“It’s all well and good to say that it’s up to businesses to get themselves ready and that’s fine for a larger company that has plenty of resources that can actually spend the money to get Brexit prepared,” said Ms Chambers, “but most of our businesses are small and medium-sized enterprises and they employ the vast majority of our citizens.

“So the Government cannot take a hands off approach. It really has to be right in there working with businesses to get them prepared.”
President of the Irish Road Haulage Association Verona Murphy said that with the current state of preparation from Revenue and the State agencies for a no-deal Brexit scenario, many of the small and medium enterprise hauliers will go out of business.

Also speaking on RTÉ’s Morning Ireland, Ms Murphy, who will run for Fine Gael at the next election in Wexford, said the lack of financial support for the sector combined with the lack of skill set are to be blamed for the difficult situation hauliers may find themselves in.

“On one level it’s cost because there haven’t been any financial support afforded to the sector. The real reason is (that) the skill set isn’t there for which we can prepare.

“The agencies have done nothing except to prepare themselves. So customs have trained customs agents to deal with some people who have no idea what they’re doing. So more small, medium enterprises in this country will only trade with the UK and there is no bases for them in which to undertake customs courses.”

Ms Murphy added that while she appreciates that the Tánaiste, the Taoiseach, and Ms McEntee have done a great job because they were the ones who “put the structure of consultation in place”, the talks that the association has been involved in for approximately three years now have brought “no result”.

Ms Murphy said that she “absolutely” shares the views of those who claim the preparations for Brexit have been too slow, adding that “frustrations levels are now rising”.

“I asked a simple question of the head of the customs the other day. What sanitary facilities are being prepared at Rosslare for the drivers who obviously are going to be held up through no fault of their own.

“I was told it wasn’t a truck stop. That’s the typical attitude of State agencies, of their superior being displayed upon what – they would possibly regard – as somebody in a lesser position. And that will only serve to increase frustration levels,” she said.

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Risk of no-deal Brexit has never been greater – Coveney

Risk of no-deal Brexit has never been greater – Coveney

Tánaiste and Minster for Foreign Affairs Simon Coveney has warned Cabinet colleagues that at no point in the last two-and-a-half years has the risk of a no-deal Brexit been greater.

He said that while a hard Brexit could still be avoided, Britain had failed to come up with any solutions or answers.

Mr Coveney also said that no staff working on no-deal Brexit planning should be redeployed during the summer months.

The memo brought by Mr Coveney has been drafted against the backdrop of the breakdown in talks between the Conservatives and Labour in London.

Taoiseach Leo Varadkar has said that there was detailed discussion at Cabinet today about Brexit and businesses are now going to be asked to step up their Brexit preparations.

Mr Coveney brought a memo on planning to Cabinet on a No deal Brexit.

Government ministers agreed that secondary legislation is needed in some areas and work needs to be done on EHIC (European Health Insurance Cards) and the Erasmus education programme.

The Taoiseach said that the staff are in place for Customs and Revenue and other areas where they are needed.

He said information campaigns informing businesses of the actions they need to take and the supports that are now available will be resumed.

He warned that there are businesses that are “perhaps taking the view that it is going to be alright on the night. And it may well be alright on the night but we cannot assume that.

“We will be asking businesses in particular to step up their planning and avail of the information, supports and advice and the funding that is already available.”

He was responding to questions from Fianna Fáil Finance spokesperson Michael McGrath.

He asked if the Cabinet made any decision today to intensify and step up preparations and efforts to support companies and hiring extra Customs officials.

Meanwhile, British Prime Minister Theresa May will set out details of her “new deal” on Brexit in a speech at 4pm, Downing Street said.

She told a more than three hour long meeting of the Cabinet: “The Withdrawal Agreement Bill is the vehicle which gets the UK out of the EU and it is vital to find a way to get it over the line.”

Her spokesman said the “new deal” includes alternative arrangements, workers’ rights, environmental protections and assurances on the integrity of the UK in the event of a backstop.

Separately, a disorderly conclusion of Brexit negotiations could “plunge the Irish economy into a recession,” according to the Organisation for Economic Co-operation and Development.

It says such a conclusion poses the most immediate uncertainty to Ireland’s economy.

In its latest economic outlook, the think-tank also acknowledges that while new housing completions have been “catching up with demand”, there will continue to be shortages in the dwelling stock for some time.

It notes that despite having moderated recently, property prices remain high and foreign investors account for more than half of commercial property investment in Ireland.

The report, which contains analysis and projections for its 36 member countries and other major economies, says changes in the international tax regime, could affect Foreign Direct Investments by multinational firms, which would pose a significant risk for Ireland.

Economic growth, according to the OECD, is projected to remain robust, but to ease gradually to 3.9% in 2019 and 3.3% in 2020.

Additional reporting Ailbhe Conneely, Conor McMorrow, PA

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The big impact of Brexit on Ireland’s small businesses

The big impact of Brexit on Ireland’s small businesses

Opinion: there is no doubt that Brexit will impact small businesses, but the impact is and will be different for different sectors

The economic and political uncertainty surrounding Brexit is a constant in our news cycle since the referendum in the UK in 2016 and there is little sign of the uncertainty dissipating. Estimates of Ireland’s national level of Brexit trade-related risk exposure are in the region of 10% of GDP. Estimates of this magnitude are not surprising, given our trade and business links to the UK.

Ireland’s small businesses particularly exposed to Brexit. In Ireland, over 90% of businesses are micro-businesses with less than 10 employees and almost eight percent are small businesses with between 10 and 49 employees.

There is no doubt that Brexit, whatever its final form, will impact small businesses, but the impact is and will be different for different businesses. Businesses that trade with the UK will potentially be affected by currency risk, trade tariffs and new regulations. Small and micro businesses account for 85% of all Irish enterprises exporting to the UK, with micro-businesses accounting for over half of all Irish firms exporting to the UK.

For some businesses, supply chains will be affected – for example, businesses that source products, components or services from the UK. In fact, Irish small businesses are likely to be disproportionately affected by a shock to supply chains as they comprise the majority of importers in certain sectors.

While some businesses do not have direct links with the UK, they will be affected by any contraction of the Irish economy in the aftermath of Brexit. There is evidence that Irish consumers are already predicting difficult times ahead as evidenced in February’s Consumer Sentiment Index. The uncertainty caused by Brexit will also be an impediment for potential start-ups. Exporting to the UK usually serves as a training ground and testbed for new businesses and entrepreneurs.

In fact, the uncertainty caused by Brexit is already impacting how small businesses in Ireland do business. Typically, in booming economies, businesses invest and expand, but Brexit is already adversely affecting business confidence and investment. As Ireland’s economy continues to grow, the AIB Brexit Sentiment Index reports that one in three small and medium-sized enterprise (SMEs) in Ireland have either postponed or cancelled investment plans due to Brexit. We know investing in innovation and technology is important for productivity and job growth, and so delayed investment and barriers to innovative activities in small businesses will have knock-on effects for the wider economy.

A dampening of investment and innovation by small businesses is also worrying in the context of the widening gap between the most productive firms and the least productive firms in our economy. The most productive firms in Ireland tend to be concentrated in a small number of sectors that are largely-foreign owned, and are often referred to as “frontier” firms. Typically, these firms are multinationals. However, non-frontier firms, which are usually smaller and indigenous, have seen declines in productivity.

This situation is not unique to Ireland, with many developed economies attempting to grapple with the “productivity gap” between frontier and non-frontier firms. Economists are increasingly pointing to the diffusion of innovations and best practices as potential drivers of firm productivity. In other words, digital technology adoption, process innovations and best management practices are all important drivers of productivity in small businesses.

It is welcome to see Future Jobs Ireland focusing on “Improving SME Productivity”, with specific ambitions outlined in terms of exploiting technology and business process improvements and improving leadership and management skills. However, data on innovation, digital technology adoption and management skills is limited, particularly for Irish micro-businesses. While micro-businesses account for over 90% of all businesses, they are often excluded from surveys of innovation (e.g. the CSO’s Innovation in Irish Enterprises) and digitalisation (e.g. the OECD’s digital adoption survey) due to sampling limitations.

If we don’t know where we are starting from, how do we measure success, or failure, for that matter? What digital technologies are micro-businesses using? Does ambition, networks or sectoral norms influence adoption and implementation? How innovative are our micro-businesses, not only in terms of the goods and service they provide, but also in relation to processes, organisational structures and management skills?

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UK jobs growth surges as labour market defies Brexit nerves

UK jobs growth surges as labour market defies Brexit

UK employers increased their hiring at the fastest pace in more than three years in the three months to January as the country’s labour market defied the broader weakness in the overall economy as Brexit approached.

The number of people in work surged by 222,000, helping to push down the unemployment rate to 3.9%, its lowest since the start of 1975, official data showed.

A Reuters poll of economists had pointed to a rise in employment of 120,000.

With the terms of Britain’s exit from the European Union still unclear, many businesses have cut long-term investment in equipment, potentially making them more likely to hire workers who can be sacked if the economy sours.

The strength of the labour market is pushing up wages more quickly.

Total earnings, including bonuses, rose by an annual 3.4% in the three months to January, the Office for National Statistics said, stronger than a median forecast of 3.2% in the Reuters poll.

Wage growth for the three months to December was revised up slightly to 3.5%, its highest since the middle of 2008.

Average weekly earnings, excluding bonuses, also rose by 3.4% on the year, in line with the Reuters poll.

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Taoiseach hosts talks with Tusk as Brexit deal deadline looms

Taoiseach hosts talks with Tusk as Brexit deal deadline looms

Taoiseach Leo Varadkar is meeting European Council President Donald Tusk in Dublin with just ten days left before Brexit, but with no deal in sight.

Mr Tusk and Mr Varadkar shook hands on the steps of Government Buildings, but declined to comment to waiting media.

The meeting comes as British Prime Minister Theresa May considers a shock ruling by the chair of the House of Commons, John Bercow, which precludes her from bringing her Brexit deal back before MPs without substantial changes.

On St Patrick’s Day, the EU’s chief Brexit negotiator, Michel Barnier, tweeted a message to what he called his “Irish friends”, saying Ireland was part of the EU for 40 years and he looked forward to another 40 of peace, prosperity and solidarity.

Mr Tusk will chair the EU leaders’ summit, which begins on Thursday and is the last scheduled gathering before the UK is supposed to leave the EU on 29 March.

It seems likely that Mrs May will seek to extend that Brexit deadline at the meeting, but she requires the unanimous support of the 27 EU prime ministers and presidents.

Her capacity to convince EU leaders she can secure parliamentary backing for any deal has been further undermined by yesterday’s ruling by the chair of the House of Commons Mr Bercow.

And with the whole Brexit process in disarray, Agriculture Minister Michael Creed was in Brussels last night seeking targetted support for farmers in the event of a no-deal Brexit outcome.

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