Business week: Businesses unconvinced by Brexit Border plans
Air Berlin goes south, Quinn returns, Voxpro sells up and Irish consumers are upbeat
An art installation called ‘Soften the Border’ by artist Rita Duffy on the Border between Belcoo in Co Fermanagh and Blacklion in Co Cavan. Photograph: Niall Carson/PA
Speculation began to mount early this week on what we could expect from the British government when it released its first position paper on the customs union – a clear sign that Brexit fatigue hasn’t quite set in.
By Wednesday, we got our answer – or at least some indication of the thoughts in Whitehall. The Border between the Republic and the North would be as “frictionless” as possible, they said. Few in the business community were convinced.
The Irish Farmers’ Association (IFA) said it was difficult to see how realistic the lack of a physical border with the North might be given UK plans to operate its own customs and trade policies.
Elsewhere, Retail Excellence, the group representing about 1,700 companies in the Irish market, said any form of hard border stood the potential of “decimating” towns.
Not only was the business community dubious, the tech industry called the proposals for an ‘invisible’ or ‘frictionless’ border “complete nonsense”. One security expert said: “If border issues were that easy to sort out do you think the US, with all its resources, would be considering building a big wall with Mexico?”
An academic said technology exists that could help with a smart border but made the point that “you simply can’t allow for the border of Europe to be porous”.
Perhaps it’s back to the drawing board in London.
Air Berlin goes south
Earlier this year the aviation sector saw one airline go under when cash-strapped Alitalia finally accepted its demise. This week it was the turn of Air Berlin, which has offered a variety of reasons for its poor performance.
For the most part, it was the loss of shareholder Etihad’s backing that forced the German carrier to file for insolvency, but its death had been in the offing for some time – Bloomberg estimated that the company had burned through almost €2 billion in six years.
And, rather than let it die easily, the German government swooped in and lent Air Berlin €150 million in bridging finance. The vultures soon followed, with Ryanair complaining to European Union competition regulators, alleging a conspiracy between the German government and Lufthansa to carve up the insolvent airline.
Berlin wasn’t happy and dismissed Ryanair’s claims as being “absurd”. Chancellor Angela Merkel said the chances that the loan would not be repaid were “relatively small”. Without the loan, she said, the airline could not have paid for fuel, and tickets would have been void.
Then, on Thursday, Ryanair was somewhat vindicated when a senior labour union official said Lufthansa would get the first shot at Air Berlin’s assets. The company’s deputy chair, Christine Behle, said: “As far as I know, the other bidders will be invited for talks afterwards and then an overall package will be put together.”
It is understood that those “other bidders” she refers to include EasyJet, a Ryanair rival. The Michael O’Leary-led airline, meanwhile, has not got a look in. However, one group representing German newspapers said the Irish low-cost airline could pick up a few of Air Berlin’s airport slots.
Sterling dips again
As if the Brexit fallout wasn’t bad enough, the value of sterling against the euro fell to a near seven-year low this week.
Sterling sank almost 1 per cent on Tuesday after UK inflation data for July came in slightly below expectations, further quelling any speculation of a rise in Bank of England interest rates over the next year. It was still under pressure on Friday.
The weak pound encouraged more visitors from the Republic to travel to the North in the first three months of the year. The latest numbers show visitors from the State took 105,000 trips to the North and spent £19 million (€21 million) – nearly 80 per cent more than they did the over same period in 2016.
Meanwhile, analysts at Morgan Stanley forecast parity between euro and sterling by next year – not good news for Irish exporters who may well see a drop in the level of UK business activity.
Quinn back in business
Former Irish billionaire, and one of the biggest losers after the financial crash, Seán Quinn is backing a new online betting business with his son Seán jnr and other family members.
The Fermanagh businessman’s empire, spanning cement production, glass-making, insurance and property, collapsed in the wake of the financial crisis in 2009.
Now he’s back with a new online gambling business, Quinnbet, which has been launched this week. Its partner in the venture is London-based FSB Technology, which has designed the website and provided the risk management software.
Seán Quinn built his original Quinn Group from small beginnings in Co Fermanagh. By 2005 it was estimated to be worth €4 billion.
However, losses in its insurance and property arms left it insolvent. Its founder was declared bankrupt in 2012, but was discharged from bankruptcy in 2015.
Voxpro sells up
With the Kielys having bootstrapped outside of a small investment from Enterprise Ireland, the couple are due a hefty windfall.
Few if any would begrudge the couple the windfall, given it took them a lot of graft to build the company.
Voxpro, which started out with six people working above a pub on Marlboro Street in Cork city in 2002, now employs about 2,700 people globally.
The firm, which offers customer experience, technical support and sales operations solutions to international customers such as Google and Airbnb, is still headquartered in Cork. In addition it has offices in Dublin, San Francisco and Folsom, both in California; Athens, Georgia; Bucharest, Romania; and Manila in the Philippines.
While the deal is good news for the company and its staff, it is perhaps disappointing to see yet another high-flying Irish firm being snapped up by a bigger player.
In an interview with The Irish Times earlier this year, Mr Kiely voiced his hope of being able to buck the trend when he said the couple had no plans to let the business go to a larger corporation and was intent on “seeing the journey through”.
It’s one thing saying it but quite another turning down the opportunity to cash in when the money comes a-calling though.
Irish consumers upbeat
Not one but two consumer sentiment surveys were published earlier this week. Despite the threats posed by geopolitical risks such as Brexit and the manoeuvres of US president Donald Trump, both indicators showed that Irish consumers are in an upbeat mood.
The latest KBC Bank/ESRI consumer sentiment index found that summer sales and holiday spending made households feel more optimistic last month with the indicator hitting its strongest level in over a year.
KBC Bank chief economist Austin Hughes described the latest reading as an “encouraging result”. However, he warned the onset of back-to-school costs, coupled with efforts to downplay the scope for positive news in the upcoming budget, means there may be weaker sentiment readings in the coming months.
The index showed sentiment at levels not seen since the tail end of 2007, with consumers saying they felt positive about employment opportunities and were prepared to go out on a spending spree.