It’s remarkable how many people – people who have never run a business – have suddenly become business or economic experts since the United Kingdom decided to leave the European Union. This is especially the case here in Northern Ireland. Few of our politicians (with some notable exceptions) have ever started or run a business. The local Director of the CBI has never run a business. But the consensus view of these economic ‘experts’ – many of whom campaigned hard for a remain vote in last June’s referendum – is that Brexit spells disaster for Ireland, North and South. They also argue that the UK’s decision to leave the customs union and single market means a hard border etc., and that will result in ruin.
But most businesses in Northern Ireland don’t trade across any borders. And, for Northern Ireland, Brexit is a once in a lifetime opportunity to take advantage of a revitalised UK, our most important trading partner.
The UK is our biggest trading partner by a vast margin – grossly more important than any EU market. In fact 86% of sales by Northern Ireland companies stay right here in the UK.
And it is for this reason that Brexit is the biggest opportunity that Northern Ireland has ever had since its inception. Northern Ireland, in short, just got lucky. The UK is a huge market on Northern Ireland’s doorstep. It’s also a free market with no customs checks or borders. And it also happens to have at its heart the world’s largest financial trading centre in the City of London.
Just look at the numbers.
The construction sector here employs around 30,000 people. The manufacturing sector employs around 80,000. Meanwhile the services sector employs close to 600,000 people – dwarfing all other sectors.
Now let’s consider this services employment number. Ask yourself, how many of these people are involved in businesses that trade across the border with the Irish Republic? The answer – very, very few.
Northern Ireland is a typical, regional, services-based economy. A look at the list of our biggest employers shows that most are UK based services businesses and retailers like Tesco, Asda, Sainsbury, the big banks and insurance companies…and call centres. There are a few big businesses that might do some cross-border trade, like MoyPark. But most don’t. And most of our small and medium businesses – hairdressers, plumbers, bathroom fitters etc. – focus their entire sales and marketing effort on a 20 mile radius of where they are based.
Indeed, the vast majority of our small businesses are one-man/woman bands that engage in precisely no cross-border or international trade. These businesses are wholly focused on Northern Ireland which is an integral part of the UK’s own single market – the world’s fifth largest economy. We’re also a member of the UK’s sterling based currency zone (and more about that later).
Our total exports to the Republic of Ireland declined by £143 million last year and amounted to £3.4 Billion. But total sales to Northern Ireland and Great Britain amounted to £57.5 billion or 17 times greater than our sales to RoI. And, of course, there’s no reason why those sales to Ireland can’t continue post Brexit – we already sell goods to Ireland despite being in a different currency zone and applying different VAT rates.
Recently I attended the all-Island “dialogue” on Brexit in Dublin. The representatives from Northern Ireland (which was exclusively called “the North” at the event, except by representatives of the Irish government) included the local Director of the CBI, various pro-remain political parties and various EU-funded border quangos. These people gave the impression to the assembled hordes of virtue signallers that most people in Northern Ireland were engaged in trading beef carcases across the Irish border and that a hard border (presented as inevitable) would spell doom for Northern Ireland, Ireland and the peace process. This analysis is not just flawed – it’s cynical, and wrong.
By comparison, on Tuesday of last week, I attended an evening function in Canary Wharf in London sponsored by Belfast City Council. The event was launching a new Belfast-London business network and was attended by hundreds of business people. Most were London based and most wanted to hear about why Belfast had become such a desirable location for financial services businesses. The reason is simple. Belfast is much cheaper than London, can provide a better quality of life and has a ready supply of talented people. And if such people can’t be found here there are quite a few professionals based in London very keen to have a life change, avail of cheaper housing and get to walk in the Mournes at the weekend.
It’s not by accident that Belfast has become one of the most important financial services and fintech centres in the UK. Unlike Dublin we’re in the Sterling zone, our law graduates understand UK common law, and we have a superb digital infrastructure.
That’s why, according to TheCityUK, around 18,000 people in Belfast alone are employed in the sector. Across Northern Ireland more people now work in financial services than work in construction. It’s a key reason why just about every major law firm in the city of London squeezed into the auditorium in Thomson Reuters in London last Tuesday night to hear about the success story that Belfast has become.
The United Kingdom is now one of the fastest growing economies in the world and is home to the world’s largest financial trading centre. London’s traders sell twice as many euros as all the countries of the Eurozone combined, and London’s three main clearing houses handle around €1 trillion of euro trades daily. And, of course, the UK isn’t even part of the Eurozone. Such is London’s dominance.
Belfast, and Northern Ireland’s, biggest trading partner is the UK. Thankfully, that will continue to be the case after Brexit. The devaluation of Sterling has had zero impact on our ability to trade with the rest of the UK. But it has seriously spooked Dublin.
In fact, Ireland is facing an existential crisis because of Brexit. Because of the country’s low corporation tax rate Ireland has become disproportionately dependent on foreign direct investment (FDI). US companies now dominate Ireland’s export trade with pharmaceutical companies exporting huge volumes to the USA and the EU. Pharma products are shipped bulk to Antwerp where they are packed. They’re also shipped to North America. Pharma businesses are attracted to Ireland because of its low corporation tax rates – a competitive advantage now under threat by President Trump and the EU Commission.
Meanwhile Ireland’s indigenous businesses – typically agribusinesses – are highly dependent on the UK market. Since Sterling devalued after the EU Referendum, Ireland exporters have been disproportionately affected. The UK is Ireland’s second largest trading country after the United States but the UK is by far the most important market for indigenous (non-FDI) businesses. Meanwhile Northern Ireland based exporters to RoI have benefitted from Sterling devaluation.
In short, few businesses in Northern Ireland will be affected by Brexit. The relatively few businesses that trade across the border are not the businesses that employ the lion’s share of service sector employment. These businesses, in short, are highly dependent on Northern Ireland being part of a huge, growing trading partner that happens to be very international and on our doorstep and it’s called the United Kingdom.