Connect with us

Analysis

Dublin still expects to count cost of Brexit despite trade accord

Published

on


Ann Murray took command of Lir, a premium Irish chocolate-maker with significant UK sales, weeks before Britain voted to leave the EU in 2016. But with an eleventh-hour trade deal finally settled on Christmas Eve, it is only now becoming clear what Brexit will mean for a business that sends a truck full of products to Britain almost every working day. 

“We’ve done all of the pragmatic, practical things that we can do,” Ms Murray said as negotiators limped towards the EU-UK trade pact. “Deal or no deal, things are going to change. They will never be as they were before.” 

The new agreement guarantees tariff-free and quota-free trade in goods, prompting considerable relief in Dublin that a disorderly UK crashout from Europe’s trading regime has at last been averted.

It also means the implementation of the Northern Ireland protocol, the mechanism agreed by the EU and UK last year to keep open the 310-mile land border with the Irish Republic — Dublin’s top priority after the 2016 EU referendum.

Micheál Martin, Irish premier, welcomed the deal, saying it represented the “least bad version of Brexit”. “There is no such thing as a ‘good Brexit’ for Ireland,” Mr Martin said. “But we have worked hard to minimise the negative consequences.”

With business facing increased costs, delays at ports and cumbersome customs paperwork once Britain finally leaves the EU’s single market and customs union on December 31, Ireland fears it will pay a hefty price.

The country’s deep trade ties with its former colonial master mean that it remains the most exposed in the EU to fallout from Britain’s protracted exit from the bloc, even with a deal.

The issue of the Irish border has dogged the Brexit process since the UK’s EU referendum in 2016 © Paul Faith/AFP/Getty Images

Not only did endless Brexit turmoil disrupt the stability in Anglo-Irish relations that helped secure the 1998 Good Friday peace agreement that settled three decades of political violence in Northern Ireland, the rows over the future of the border sharpened tensions in Northern Ireland between the pro-British Democratic Unionists and Sinn Féin Irish nationalists.

Dublin’s fervent hope now is that the trade agreement will restore calm to the political relationship with its closest neighbour after the Brexit rupture.

But Roy Foster, a leading Irish historian, said it would be a huge challenge to regain the spirit of “joint endeavour” that Dublin and London developed before the Good Friday pact and for almost two decades after it. “The gears, the levers have been thrown absolutely into reverse on all that, which I think is tragic,” he added. 

Brexit still presents huge questions for business in Ireland, whose trade in UK markets will be crucial as its economy struggles to overcome the effects of the pandemic. 

Thousands of companies in Ireland would have suffered badly in a no-deal scenario because of steep World Trade Organization tariffs that would have been imposed on its €13.5bn export trade with Britain, adding to the cost of goods that comprised 9 per cent of the country’s total exports in 2019. Such tariffs would also have increased the price of imported British goods.

Significant foreign direct investment means Ireland today is one of the world’s most globalised economies with the share of exports to the UK down from 55 per cent in 1973, when the two countries joined the then European Economic Community on the same day. But the dangers to Ireland from a no-deal Brexit were still very significant — and were heavily concentrated in its food and drink industries.

Line chart of Share of total trade over previous 12 months (%) showing Ireland's declining reliance on trade with the UK

Fergal O’Brien, policy director with business lobby group Ibec, said WTO tariffs would have added €1.5bn to the cost of such goods. “For a lot of subsectors in that industry, trading into the UK in that context would not be viable.”

Such risks were all the greater for Ireland because of coronavirus, which left 352,000 people out of work in the last lockdown and more than 19,000 companies claiming government wage subsidies.

Like many Irish exporters to the UK, Lir resolved after the Brexit vote to lessen its reliance on the British market that made up 90 per cent of its sales in 2016. The company, owned by German venture capital investor Zertus, sells chocolate under its own brand and with alcohol flavours under licence from Baileys cream liqueur, Guinness stout and Famous Grouse whisky. It also makes private-label ranges for large British supermarkets. 

“In the last four years we have tripled our exports outside the UK,” Ms Murray said, citing increased sales in Germany and the Nordic countries. 

Lir has always sent products to those new markets via Britain — the “land bridge” route to the continent — but now it plans direct continental shipments to avoid Brexit paperwork and any delays at ports as the new regime takes force. “We’re actively engaging in booking the slots for avoiding the land bridge for the first months in 2021.”

But the UK still accounts for 60 per cent of Lir’s sales, enough for 250 truck shipments to Britain each year that will soon be subject to increased border friction under the new trading arrangements. Ms Murray said Lir has had to appoint customs clearance agents to manage this trade from January and take out certification as an authorised economic operator to fast-track customs. 

“Even if you’re not paying a tariff, we have to ensure that the products we sell are classified under the customs headings which we never had to do before,” Ms Murray said.

For business in Ireland generally the looming requirement for checks on UK trade is a huge and costly change that presents multiple problems. A report this month for the Irish parliament by Dublin Port, Ireland’s biggest, said checks would be required on 900,000 UK cargo shipments each year, a big rise from 200,000 annual checks on current non-EU trade at the port. 

Eamonn O’Reilly, chief executive of Dublin Port: ‘The checks are going to cause delays, of that there is no doubt. That is the nature of border checks’ © Aidan Crawley/Bloomberg

This is a very tall order, according to the report. Eamonn O’Reilly, chief executive of Dublin Port, said speed would suffer. “The checks are going to cause delays, of that there is no doubt. That is the nature of border checks.

“It is the opposite of what we saw in 1992 when the single market came in, when we saw trade accelerating through ports. Brexit is undoing the efficiencies which the single European market aimed to introduce.”

The new regime will come in “virtually overnight” once the UK transition ends on December 31, said Mr O’Brien of Ibec. “The big thing we’re facing from January 1 is reduced efficiency in logistics and supply chains. Businesses are holding higher stocks again for contingency purposes, and that comes with higher costs.”

Sterling’s weakness in the Brexit era presents other complications, as it erodes the ultimate value to companies in Ireland from their sales in the UK.

Pinewood, a County Tipperary generic pharmaceuticals company with 60 per cent of its sales in Britain and daily shipments to that market, said it had moved some UK contracts to the euro from sterling last year to preserve its return. “That’s probably the biggest concern we have,” said Colum Honan, the site director.

Lir Chocolates makes private-label ranges for large British supermarkets © Paulo Nunes dos Santos/FT

Despite the coronavirus shock that has led to record unemployment in Ireland, the economy is forecast to grow this year because multinational pharma and tech companies in the country are booming. But the pandemic has blown a huge hole in Ireland’s public finances, adding billions to its €223.6bn national debt.

Back at Lir’s chocolate factory, Ms Murray said she never expected Britain leaving the EU would turn out to be such a “vitriolic” process but said commerce must survive the split. “They’re next door. We speak the same language. We travel across them in order to get to our other markets.”

Northern Ireland leaders set aside Brexit divisions to welcome deal

Northern Ireland’s first minister Arlene Foster welcomed the EU-UK trade accord, saying the region will seek maximum advantage from arrangements she opposed when Boris Johnson settled the vexed question of the Irish border last year. 

Mrs Foster, leader of the pro-Brexit Democratic Unionists, and deputy first minister Michelle O’Neill of the Remain-supporting Sinn Féin Irish nationalists, set aside bitter divisions over the UK’s EU withdrawal as they hailed the deal on Thursday.

Their statements reflect relief in the devolved executive that a no-deal outcome was averted, something that would have disrupted the region’s economy and politics. 

Mrs Foster had opposed the Northern Ireland protocol, part of the Brexit withdrawal agreement signed last year to keep open the 310-mile land border with the Irish Republic.

But following the announcement of the deal by Mr Johnson, she indicated the executive would pursue all potential benefits from the protocol, which was cast as a “best of both worlds” opening for the region to trade freely with both the EU and the UK. 

“This is the start of a new era in the relationship between the UK and the EU and in Northern Ireland we will want to maximise the opportunities the new arrangements provide for our local economy,” Mrs Foster said.

Ms O’Neill said the executive must consider detailed aspects of the agreement. “There will be many questions on what the agreement means for businesses and citizens and it is important they get that clarity.”

Despite the political unanimity, Northern Ireland faces tough new tests in the wake of the trade deal. 

Business in the region has long worried about new compliance costs, paperwork and delays at ports.

Plans to implement the protocol were agreed only this month — three weeks before it comes into effect — and business has pressed for more detail.

“Questions remain on operational readiness and the longer-term impact for supply chains,” said CBI Northern Ireland, the lobby group.



Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Analysis

A pivotal moment for Scotland’s independence champion

Published

on

By


Nicola Sturgeon, Scotland’s first minister, has credited her former mentor and predecessor Alex Salmond with making her career.

Sturgeon’s appearance on Wednesday morning before a parliamentary inquiry into her Scottish National party government’s handling of harassment complaints against Salmond will be a potentially pivotal moment for her, and her dream of leading Scotland to independence from the UK.

At an extraordinary appearance before the parliament committee on Friday lasting almost six hours, Salmond accused Sturgeon’s closest associates of maliciously colluding to drive him from public life and his former protégée of breaching the ministerial code by intentionally misleading parliament — potentially a resignation matter.

Sturgeon denies the allegations. But the televised session must have made difficult viewing for the formerly shy working-class girl from Ayrshire in south-west Scotland who has, in recent years, helped bring her nation closer to independence than at any time since the 1707 union with England that created Great Britain.

When Sturgeon succeeded Salmond as first minister in 2014 — in the aftermath of a referendum in which Scottish voters backed staying in the union by 55-45 per cent — she was fulsome in praise of her predecessor. “Without the guidance and support that Alex has given me over more than 20 years, it is unlikely that I would be standing here,” she told the Scottish parliament.

But Salmond was hardly the first figure in the SNP to spot Sturgeon’s talent. Aged just 16, Sturgeon in 1987 timidly rang the bell of then SNP general election candidate Kay Ullrich to offer her support. Four years later Sturgeon was a veteran student campaigner and, according to biographer David Torrance, Ullrich was presciently describing her to party comrades as the future “first female leader of the SNP”.

Sturgeon, who describes her nationalism as more “utilitarian” than “existentialist”, has said her early interest in politics was driven by anger at the social cost and deindustrialising impact of the policies of late UK prime minister Margaret Thatcher and the powerlessness of Scottish voters to resist them.

After studying law at Glasgow university, she became a community lawyer and a rising SNP star. In 1999, she was elected to the new devolved Scottish parliament and by 2004 she was a contender for the party leadership. But she accepted the junior place on a joint ticket after Salmond, who had already led the SNP from 1990 to 2000, entered the race.

Sturgeon, right, with Kay Ullrich in May 1999 © Mirrorpix/Alamy

Robert Johns, politics professor at Essex university and author of a book on the SNP’s rise, said Sturgeon was a big factor in the party’s fortunes as deputy leader from 2004 and as deputy first minister of Scotland after it won power in Edinburgh in 2007.

“She’s got better and better at being seen as a normal human being and becoming likeable, while at the same time not losing that reputation for competence,” Johns said.

After playing a central role in the 2014 referendum, which the pro-independence Yes campaign lost by a much smaller margin than expected, Sturgeon took over an SNP energised rather than dispirited by defeat.

Today, the first minister enjoys approval ratings unmatched by any other UK party leader despite 14 years in government and a patchy record on key policies.

Voting with her husband Peter Murrell in Glasgow in 2019 © Jeff J Mitchell/Getty Images

An international education survey in 2019 found Scotland’s progress in narrowing the attainment gap between advantaged and disadvantaged pupils had actually slowed since Sturgeon made the issue her top priority four years earlier. And the SNP’s reputation for governing competence has been dented by serious problems with construction and equipment at flagship hospitals in Edinburgh and Glasgow. 

Sturgeon’s instinctive caution and mastery of detail — on display at near-daily televised briefings — appears to have served her well during the coronavirus pandemic. Most voters think she has handled the crisis better than UK prime minister Boris Johnson. While Covid-19 deaths in Scotland are high by international standards, they have been somewhat lower than in England.

But Sturgeon’s determination to keep a tight rein on the SNP and her reliance on a small inner circle of confidants, which includes her husband and SNP chief executive Peter Murrell, has fuelled discontent among some party colleagues. Formidable self-discipline was an ingredient in the once anarchic SNP’s rise, Johns said, but now the party felt “over-professionalised”. “It’s more top-down than it ever used to be,” he added.

‘The Alex Salmond Show’ on RT © Russia Today

Some in the SNP also believe that Sturgeon has been too cautious to take full advantage of a rise in support for independence since the UK in 2016 voted for Brexit despite 62 per cent of Scottish voters backing staying in the EU. Tensions in the party have also grown over her plans to make it easier for trans people to receive official recognition for the gender they identify as.

But it is the rift with Salmond that now threatens Sturgeon’s hopes for a renewed push for a second independence poll.

Relations between the two had already been tested by Salmond’s decision to host a chat show on Kremlin-backed Russian broadcaster RT when in 2018 two civil servants made formal complaints against the former first minister dating to his time of office.

In 2019, the Scottish government accepted that its investigation into the complaints had been “tainted by apparent bias”. At a criminal trial last year, Salmond was acquitted of all of the 13 sexual offences charges against him.

Salmond has accused Murrell and Sturgeon’s chief of staff Liz Lloyd of involvement in a “concerted” effort to damage his reputation “to the extent of having me imprisoned”. They deny the allegations.

Salmond and Sturgeon present the white paper for Scottish independence in 2013 © Jeff J Mitchell/Getty Images

Salmond has also accused Sturgeon of breaching the ministerial code by misleading parliament about when she learned of the complaints against him and by failing to report meetings between the two. And he says she has presided over a broad failure of “national leadership”.

They are charges that, if proven, could prove politically fatal, but Sturgeon — a formidable debater — says she is “relishing” the opportunity to set the record straight on Wednesday.

With crucial elections for the Scottish parliament just nine weeks away, her committee appearance could have a major impact on the UK’s constitutional debate, said Mark Diffley, a consultant on Scottish public opinion.

Polls suggest the SNP has been on course to go from minority to majority government, removing its need to rely on the pro-independence Scottish Greens for support on constitutional matters and providing a strong mandate to demand UK approval for a second referendum.

But securing a majority in the proportionally representative Scottish parliament is a difficult feat that would be made harder if Sturgeon was not seen to effectively rebut Salmond’s allegations, Diffley said. “She can, with a good performance, recover some of the damage,” he added. “It’s a huge deal for her — and she knows it.”



Source link

Continue Reading

Analysis

Can the lumbering US housing department become a force for change?

Published

on

By


One of Marcia Fudge’s first big battles as an elected official was over a shopping centre in Warrensville Heights, Ohio.

A developer wanted to build a hub for major retailers in the largely black Cleveland suburb, which has a population of 13,000. But Fudge would not have it. Warrensville Heights did not want “giant retail stores,” but office space and hotels, she said.

“We also control our own destiny and our own vision for the future,” Fudge, who was mayor of Warrensville Heights between 2000 and 2008, said at the time. “The days of plantation rule are over.”

Fudge won that battle and many others like it, and is widely credited for revitalising the area during her eight years as mayor.

Now she is being counted on by progressives to do the same in urban areas across the US as President Biden’s nominee to lead the Department of Housing and Urban Development (HUD). The $50bn agency manages 1m units of public housing and oversees a vast array of federally-funded housing programs — from insuring mortgage loans to voucher programs for low-income families.

Housing reform is expected to be a key part of Biden’s efforts to support the black voters who propelled him into office, many of whom still deal with the consequences of decades of segregation and discrimination in America’s housing market.

Malcolm Glenn, a fellow at the New America think-tank, called Fudge’s appointment to HUD “a real opportunity” to make tangible progress on an issue where race and economics are tightly bound.

“If this administration and Secretary Fudge make racial equity, not just a core, but sort of the singular core guiding force around everything that they do, I think we’ll be in a much much much better place than we’ve ever been,” Glenn says. “I don’t think any HUD secretary has ever done that.”
 
Ro Khanna, a Democratic Representative from California, believes Fudge is uniquely qualified for the job. “She understands deeply housing inequity, she understands racial exclusion,” Khanna said. “[She will] really focus on equity in housing and anti-racist zoning laws and anti-racist policies.”
 
But to deliver on those hopes, Fudge will have to grapple with a demoralised agency facing dual crises. An unprecedented number of Americans face the threat of eviction because of the Covid crisis. And inside HUD, a mass exodus of career staffers under previous Secretary Ben Carson has decimated the ranks.

Congress slashed the department’s operating budget by 15 per cent last year.

Carson, a black surgeon who grew up in public housing, did not believe that it was the government’s responsibility to rectify the effects of systemic racism on the American housing market.

HUD also has a long record of underdelivering, and has sometimes been regarded as a backwater of government. Rates of home ownership among blacks have been largely stagnant since the 1968 Fair Housing Act outlawed discriminatory policies that, among other ills, made it exceedingly difficult for blacks to take out mortgages.
 
Even Fudge acknowledged its shortcomings soon after her nomination. “I don’t know that anybody can even tell you what HUD has done,” she said. “So I really do think that HUD has not fulfilled its mission.”

Fudge, 68, has lived in the same tightly-knit neighbourhood for decades. Her personal phone number is listed in the local phone book, and she drives her 89-year-old mother to church every Sunday morning, stopping first at McDonald’s for a cup of coffee.
 
Her success in Warrensville Heights elevated her to Congress before the end of her second mayoral term. But her ascent was also tinged with tragedy: she was elected to fill the seat of her close friend and former boss, Congresswoman Stephanie Tubbs Jones when she died suddenly in August 2008.

“She’s tough as nails and I have to caution her sometimes about being too tough,” said Jim Clyburn, the House majority whip, adding that Fudge is the first person that fellow members of the Congressional Black Caucus members confide in during a crisis.

During her time in Congress, she worked closely with the Department of Agriculture, an agency not often thought to be at the forefront of the fight for racial justice. But Fudge prodded it to expand food voucher programs, development schemes in rural areas, and for clearer labelling on food products.
 
She was actually angling for the top agriculture job when Biden tapped her for HUD instead. Last year, she told Politico in November: “You know, it’s always ‘we want to put the black person in [the Department of] Labor or HUD.’”

At HUD, Fudge has proposed boosting spending on housing, establishing programs to help Americans save up for mortgage down payments, and transforming a voucher program for low-income renters from a lottery to a guarantee for everyone that meets the requirements.
 
“Her style is not combative. She prefers to get along, but she’s not a pushover,” said Cleveland mayor Frank Jackson, who worked closely with Fudge during her mayoral tenure. “That means just don’t piss her off.”

In response to a question at her confirmation hearing from Republican Arkansas Senator Tom Cotton on what he called a “long history of intemperate comments”, Fudge replied: “Sometimes I am a little passionate about things.”

She is almost certain to meet further opposition. During the confirmation hearing, Pennsylvania’s Republican Senator Patrick Toomey complained that Obama-era fair housing policies were too costly and time consuming for home builders — and Fudge wants to go much farther than the Obama administration did.

People who know Fudge do not expect her to back down. “I think President Biden and his team want to have a slugger in that position,” said Tami Jackson Buckner, a partner Michael Best Strategies and sorority sister of Fudge’s. “She is someone who knows that without a home, it’s hard to fulfil your American dream.”



Source link

Continue Reading

Analysis

Britons brace for price of UK going to net zero

Published

on

By


When the UK became the world’s first major economy to commit to a binding target of “net zero” carbon emissions by 2050, it had already made good progress with its electricity grid.

The rapid growth of renewable energy in the UK and the closure of many coal-fired power stations has cut the sector’s emissions by more than 70 per cent since 1990, and sent cleaner electricity to homes with minimum impact on consumers’ lives.

But as chancellor Rishi Sunak prepares to deliver a green-tinged Budget on Wednesday, and the UK gets ready to host the UN COP26 climate conference in Glasgow in November, experts are warning that decarbonising the electricity grid was in many ways the easy part of the journey to net zero.

“This year half the electrons supplied to British homes were green, but that doesn’t matter much to the consumer — the next stage of reforms and changes will be very different,” said Chris Stark, chief executive of the Committee on Climate Change, an independent body that advises the government on how to reach net zero.

The next leg of the journey will require consumers to adapt the way they live and, for those able to pay, also get their wallets out.

Hitting the net zero target will require sweeping changes in two key areas: transport, as the shift to electric cars accelerates, and buildings, where an overhaul is required to the way 30m homes are heated and insulated.

As the UK car fleet goes electric, the Treasury will need to find a way to recoup the £37bn a year it currently secures from carbon taxes, mostly fuel duty and vehicle excise duty © Dinendra Haria/SOPA/Getty

And the shift to low-carbon vehicles and swapping out of gas boilers for electric heat pumps presents the government with a series of delicate political and fiscal choices.

The projected cost is immense: the CCC estimates that annual capital spending largely by the private sector in greening the economy will peak at £50bn a year by 2030. That represents about one-eighth of current investment by the public and private sectors.

However, the CCC calculates that from the mid-2040s savings in operating spending — stemming in significant part from how it will be cheaper to run an electric car than a petrol-engine vehicle — will start to exceed the annual investment.

Stream graph showing that UK capital spending of about £50 billion a year is needed to hit the net-zero target, but it will be gradually offset by lower operating costs from deploying green solutions

The greening of transport and homes will create winners and losers, and the government has yet to clarify where the cost burden will fall. The Treasury has said it will later this year publish a net zero review, setting out in more detail “how the costs of achieving net zero emissions are distributed”.

For transport, which the CCC estimates will require £11.4bn of average annual investment over the next 30 years, the political pathway is easier than for buildings, according to Josh Buckland, who was an adviser to former business secretary Greg Clark and is now at consultancy firm Flint Global.

“Transport is to some degree a solvable problem,” he said. “Consumers can buy cars through financing deals, and so don’t have to pay up front costs.”

Still, there are political potholes ahead. As the UK car fleet goes electric, the Treasury will need to find a way to recoup the £37bn a year it currently secures from carbon taxes, mostly fuel duty and vehicle excise duty.

Stacked bar chart showing UK tax revenues from activities involving carbon emissions in 2019-2020 in billions of pounds sterling

The main contenders for replacing that revenue, said Buckland, are some combination of per-mile road-pricing and congestion charging — both ideas the Treasury has been toying with for years but shied away from for fear of a political backlash.

But far more problematic than transport, according to experts, will be the greening of the UK’s housing stock, which the CCC estimates will require £11.7bn of average annual investment over the next 30 years — and a massive shift in consumer attitudes. 

A 2020 poll by Energy Systems Catapult, a non-profit organisation, found that 49 per cent of people did not even consider their gas boilers as contributing to global warming — even though they account for almost one-fifth of carbon emissions.

The gap in public understanding is a huge challenge, according to Joss Garman of the European Climate Foundation, another non profit organisation. “Right now there is a big gulf about where the policy conversation is on decarbonising heat and where the public conversation is,” he said.

The scale of the necessary transition is also immense. The UK currently installs an estimated 30,000 electric heat pumps a year, while the government’s own goal is 600,000 a year by 2028, but to hit the net zero target installations will need to run at well over 1m a year into the 2030s and 2040s.

The CCC estimates that it will cost an average of £10,000 per household to achieve the target, with heat pumps priced at about £6,500 compared to £2,000 for a conventional gas boiler.

In its interim net zero review published in December, the Treasury was vague about how these costs will be borne, noting that they will be absorbed by households, property owners or the taxpayer, “depending on policy choices”.

Compared to transport, where an electric car is obviously attractive to the consumer, the political challenge of greening the nation’s homes are legion, said Buckland. 

“Firstly there is the upfront cost issue for homeowners, but also the consumer experience is different,” he added. “Gas boilers heat your home at the flick of a switch, whereas a heat pump takes 24 hours and heats the home to 17 to 19 degrees. It will require an attitudinal shift.”

Persuading consumers to spend money on heat pumps and loft insulation rather than kitchens and bathrooms will require a cocktail of grants and incentives, said Stark, which the government has so far failed to devise.

“There isn’t a technical barrier here, so much as the lack of a plan,” he added.

To drive change, the government could consider flipping the balance of energy taxes on to gas from electricity, which currently attracts far higher greenhouse gas levies.

Whatever the policy decisions, said Stark, the government will soon have to put some cards on the table when the Treasury publishes its net zero review before the UN COP26 summit. “To be credible it will have to spell out a clear plan . . . and that includes the fiscal choices ahead.”



Source link

Continue Reading

Trending