Blair wades into Brexit as world of finance takes stock

Business Week: Property bounce, EU finance reforms, and Irish companies expanding

Brendan O’Leary, John Palmer and John Kinnane of the  Department of Finance, at a press conference on Wednesday to announce the end-year exchequer returns. Photograph: Brenda Fitzsimons

Brendan O’Leary, John Palmer and John Kinnane of the Department of Finance, at a press conference on Wednesday to announce the end-year exchequer returns. Photograph: Brenda Fitzsimons

 

Following a year dominated by Brexit talks and intense pressure on the Republic’s corporate tax practices, this first week of 2018 brought an opportunity to take stock on what’s to come.

Domestically, housing and the spiralling costs of buying and renting property were never far from the headlines. Two surveys this week indicated that property prices continued to bounce back last year.

A report from Daft.ie indicated that they rose on average by more than €20,000 to €241,000 nationwide, up 9.2 per cent on 2016.

A separate study from MyHome.ie, which is owned by The Irish Times, put the annual rise in prices at 10.2 per cent year-on-year to €242,000. House prices nationally have risen by an average of almost 50 per cent since their lowest point five years ago.

Meanwhile, builders funded by the National Asset Management Agency (Nama) are seeking permission to build 8,500 new homes this year.

A look back over the year’s exchequer returns would suggest the State is awash with money. Revenue collected a record €51 billion from workers and businesses in 2017, according to figures published on Wednesday.

Overall, exchequer returns show the State collected €58.4 billion last year, including €3.4 billion from the sale of 29 per cent of its stake in AIB. The Government spent €56.5 billion of that, leaving us with a €1.9 billion surplus.

It wasn’t such a good year for car dealers, as sales of new vehicles fell 10.4 per cent to 131,356, with weaker sterling driving a significant rise in used imported cars, which rose 29.52 per cent to 93,454.

Toyota Ireland chief executive Steve Tormey predicted that sales of hybrid cars would overtake diesels within the next two years. Diesel sales accounted for 65 per cent of new cars last year, but Tormey predicted that by 2020 that figure will fall to 20 per cent, with buyers moving to hybrids, bringing its share to 25 per cent.

Elsewhere, the value of Dublin pub sales in 2017 fell by almost 50 per cent on the previous year as just 20 pubs were sold compared to 30 the previous year. Figures released by commercial property consultant CBRE show the value of pubs sold was €22 million last year compared to €43 million in 2016.

Blair enters the Brexit fray

The Christmas holiday lull may have given EU and UK negotiators time to pause for breath before the second phase of Brexit talks begin in March, but it didn’t stop former British prime minister Tony Blair from entering the fray.

Blair said what many others have been saying since the end of the first phase of talks, which was that the issue of the Border remains unresolved despite the appearance of a deal on the matter.

“The important thing about the deal on Ireland was that it wasn’t a deal, it was the agreement to postpone the deal,” he told The Irish Times. “You are either in the single market and customs union, in which case you have an open border and frictionless trade, or not, which means you have a hard border and a hard Brexit.”

Blair might find himself off Theresa May’s Christmas card list next year after he went as far as to say the Irish Government would have a strong case to oppose a final Brexit deal without a clear, detailed agreement on how to avoid a hard border.

May, for her part, was said to be braced for a possible French raid on Britain’s £8 trillion asset management industry after Brexit, with Dublin, Frankfurt and Luxembourg also lurking.

IDA Ireland said it expected to announce a significant number of new investments from multinational firms in the coming months and forecasted further wins on the back of Brexit.

“The Brexit initiative from our perspective is going reasonably well, but it is not reflected in jobs on the ground yet,” IDA chief executive Martin Shanahan said.

Shanahan also touched on the threat from US president Donald Trump’s tax cut. “Does it signify a significant change from an Irish perspective? I don’t believe so, for the reason that it isn’t all about tax. I can tell you sitting here today that I expect the next couple of months to be strong in terms of investments.”

Trump’s tax cut has boosted the fortunes of at least one Irish company. Building materials firm CRH’s net gain from the sale of its US distribution business may increase by €140 million as a result, according to a Davy analyst.

Meanwhile, company accounts filed this week showed Trump’s investment in the west Clare golf resort of Doonbeg has yet to make a profit despite a 30 per cent jump in revenues to €6.5 million.

MiFID makes its mark

EU reforms known as Markets in Financial Instruments Directive (MiFID) came into effect on Wednesday, but the Central Bank was left red-faced after “an issue” caused it to miss a key deadline.

The reforms include the imposition of significantly higher obligations on banks and investment firms to report transactions, including equities, commodities and bonds, to regulators.

While the Central Bank had planned to have systems in place where its computers could automatically receive data from financial firms – referred to as “machine-to-machine” reporting – an “issue” cropped up that could not be rectified before MiFID II went live.

This means financial firms must continue to actively file detailed reports on transactions via an online system.

In other news, the Central Bank won approval for a 17 per cent increase in its operating budget, but was criticised over its handling of the State’s tracker mortgage scandal.

The Central Bank Commission granted a €294 million increase in the regulator’s operating budget, which should help it increase its headcount amid stiff competition from the private sector. But the minutes from its November meeting also show that commission members said the regulator’s communications strategy around the tracker issue had been “flawed”.

Blueface and ICG lead Irish expansions

Finally, several Irish companies announced expansion plans. Cloud communications company Blueface agreed to a $500 million merger with US rival Star2Star Communications to create a global competitor in the enterprise telephony market. The deal will see “significant” growth at the new company’s Dublin base.

Irish Continental Group said it will spend more than €165 million on what will be the world’s biggest car ferry for its Dublin to Holyhead route after signing a deal with German firm FSG to build the ship and deliver it before mid-2020.

Elsewhere, revenues at Staycity Aparthotels rose by 25 per cent in 2017, as the group eyes up significant expansion across Europe, with its Dublin portfolio expected to grow tenfold by 2022.

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