The prime minister is under pressure, economists are slashing growth forecasts and companies are warning of Brexit’s dire consequences. London? No, Dublin.
The intertwining of trade and finance means no other country is feeling the fallout from the U.K.’s vote to leave the European Union more than Ireland. In the year the Irish marked the centenary of their uprising against British rule, the country remains at the mercy of the unfolding drama in its closest neighbor.
“It’s the most serious, difficult issue facing the country for 50 years,” said John Bruton, 69, who was Irish prime minister between 1994 and 1997 and later served as the EU’s ambassador to the U.S.
Exporters have warned the plummeting pound will erode earnings and economic growth, just as a recovery had taken hold after the 2010 international bailout that followed the banking meltdown. Irish shares have declined, not least because the U.K. is the top destination for the country’s exports after the U.S. and the biggest for its services.
Meantime, Prime Minister Enda Kenny is fending off demands by Northern Irish nationalists for a reunification poll as he comes to terms with the loss of a key EU ally and plotters from his own party try to topple him. Then there’s the future of the U.K.’s only land border with the EU.
“The consequences are mind-boggling,” said Eoin Fahy, chief economist at Kleinwort Benson Investors in the Irish capital.
Britain and Ireland joined the European Economic Community in 1973. Ireland was drawn in part to escape what one politician called “our gate-lodge attitude towards England.” More than four decades later, the two countries remain woven together economically as well as culturally and linguistically.
Ireland uses the euro, yet does about $45 billion of trade with the U.K. About 380,000 Irish citizens living in Britain were eligible to vote in the Brexit referendum. Britain also chipped in for Ireland’s bailout six years ago, despite not being part of the euro region. When Theresa May took over as British prime minister last Wednesday, Kenny was among three leaders she spoke to, along with Germany’s Angela Merkel and Francois Hollande of France.
Companies like Netwatch Systems thrived on those ties. From its base in Carlow, southeast Ireland, the video-surveillance company monitors more than 500 sites in cities like Birmingham, Manchester and London, sending live audio warnings to intruders. Netwatch, which ventured into the U.K. in 2007, generates about a fifth of its sales there. The 8 percent slump in the pound against the euro since the June 23 referendum has hurt.
“We were all shocked” by the result, said David Walsh, 51, one of Netwatch’s founders. “We’ve come through a fierce recession over the last eight years and now another knock.”