We have spoken before about the issues and opportunities that lay ahead for the Irish economy in the wake of Britain’s somewhat shocking Brexit vote results. In the weeks since the vote there has been a continuous atmosphere of uncertainty about all things economic both here and across the water.
Goodbody’s recent health check for the third quarter of 2016 shows that Ireland’s economic growth having just about managed to get its feet moving, is due to slow in the next 18 months. This is to be expected however as the view on the Irish economic status becomes increasingly cautious due to our tight links with Britain. It is expected that Brexit will trigger some form of a recession in the UK, primarily related to the uncertainty of the situation and lower spending habits as a result. When or how this would hit Ireland remains to be seen but it is undeniable that it will have a knock on effect to our small island with Goodbody predicting that our domestic demand will fall to 4.2% in 2016 and then lower again to 3.7% in 2017. Goodbody’s chief economist Dermot O’Leary has stated that;
“An imminent UK recession, triggered by Brexit-related uncertainty, is likely to take the gloss off a robust Irish economic performance.”
It has also been reported this week that some Irish banks are quite vulnerable to a possible downturn with HSBC claiming that they are enter a period of heightened uncertainty as tax profits fall. Despite making significant progress, Irish banks remain vulnerable to any future financial downturns. Recently, stress tests were conducted throughout Europe in order to ascertain how banks would survive a recession. These tests caused some concern for the Irish economic situation as both AIB and Bank of Ireland fared poorly in these tests as the second and fourth worst performers respectively.
Again these seem like grim tidings but it is important to remain open minded as analysts have suggested that weak asset quality and recent losses on bad loans might give good reasoning behind these poor performances and that the exercise did not take into account progressions in the last year and that our high level of overall debt skews these results unfavourably against our banks.
There was however an unexpected silver lining in Ireland’s economic situation which came in the form of Ireland’s valiant efforts in the Euros 2016 tournament. The tournament has reportedly send grocery sales skyrocketing with stores such as Supervalu and Dunnes recording a 3.4% and a 6.5% rise in value of sales during the latest period, whilst bargain stores such as Dealz also saw a great surge in sales.
It is hoped that the weakened sterling will not cause floods of shoppers to cross the border for bargains as we have seen happen before, and that although there is plenty of uncertainty in the air and the reports are laced with dread, that the Irish economy can level out and perhaps even benefit from this uncertainty as we have seen recently that smaller retailers can flourish in these times.
Should you require any help, advice or guidance on your own business or financial matters please don’t hesitate to contact us here at DCA Accountants where we are always more than happy to help.
Manager Index, showing a new push towards caution ahead of the Brexit vote.
Whilst the future and coming negotiations between Britain and the EU will be crucial to Irish interests, we will be reliant on the EU side to maintain the best interests of Ireland. This puts us in an interesting position as much of our business is reliant on the UK. It is hoped that in particular, the Common Travel Area agreement that is in place between the UK and Ireland remains in place as new borders would cause chaos for Irish people working in the UK, as well as making our trade routes increasingly difficult.
It will certainly be a long road of uncertainty ahead for Irish and British businesses, but there is still hope on the horizon and whilst business may not resume as normal for all, new pathways will be forged in the wake of Brexit.
As always if you require any guidance, advice or assistance with your own business or financial matters please don’t hesitate to contact us here at DCA Accountants, let us be the one constant for your business in this time of change.
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