Brexit deal moves from ‘dead’ to ‘promising’ as clock ticks

Business Week: Also in the news was the budget; corporation tax; and the banks

Taoiseach Leo Varadkar met UK premier Boris Johnson at Thornton Manor in Liverpool this week.

Taoiseach Leo Varadkar met UK premier Boris Johnson at Thornton Manor in Liverpool this week.

 

Just when it seemed like all hope of a Brexit deal was dead in the water – out of nowhere, comes fresh hope of an 11th-hour reprieve.

The meeting between Taoiseach Leo Varadkar and Boris Johnson at Thornton Manor in Liverpool had not been expected to yield anything. Yet following the exchange, both sides could see “a pathway towards a possible deal”.

The details were sketchy and even the most optimistic observers believe it will still be a close-run thing, but, with EU leaders set to meet next week for their final summit before the Brexit deadline, it’s a start.

Earlier, the mood between the two sides had soured when Downing Street gave reporters off-the-record briefings, first attacking Varadkar, claiming he did not want a deal, before taking aim at German chancellor Angela Merkel.

Officials in Dublin expressed bemusement at the claims in relation to Varadkar, widely attributed to the prime minister’s chief adviser Dominic Cummings, but expressed the view they were aimed at British voters rather than EU leaders.

Then it was Merkel’s turn. Downing Street claimed she had told Johnson in a phone call that Northern Ireland must remain in the EU’s customs union forever and that the Republic enjoys a veto in relation to the matter.

“It was a very useful clarifying moment in all sorts of ways,” said the source. “If this represents a new established position, then it means a deal is essentially impossible not just now but ever.”

The briefings caused considerable anger in Europe. Donald Tusk tweeted directly at Johnson, accusing him of playing “some stupid blame game” before demanding to know where he was taking matters.

For now though, Dublin and Brussels believe we may be heading back towards a Northern Ireland-only version of the customs partnership previously proposed by Theresa May.

That would be welcome news in the context of the Central Bank warning this week that a no-deal Brexit would cost about 73,000 jobs and plunge the economy into recession.

Business lobby group Ibec said companies could suffer a €500 million a year loss in export sales to the UK under a disorderly Brexit, and called for a multiannual funding framework to deal with it.

Brexit deprives Government of tax cuts

The shadow of Brexit loomed over Minister for Finance Paschal Donohoe’s budget this week, depriving the Government of the customary tax cuts it would usually shower upon the electorate with an election approaching.

The “Brexit budget”, as it was dubbed, saw plans for income tax cuts and welfare increases abandoned. Donohoe conceded it was a mostly standstill budget that will make little difference to most people’s finances.

Donohoe said €1.2 billion would be borrowed to carry out the necessary fire fighting should there be a no-deal Brexit, adding to a total spending bill of €70 billion next year.

There was also, as expected, an increase in the carbon tax which will add 2c to a litre of petrol and diesel, though increases to home heating fuels will not come into effect until May.

Additional revenue will be raised through increases to commercial stamp duty and adding a further 50c to the price of a packet of cigarettes. The were also anti-avoidance measures aimed at the property industry.

Brexit was also blamed for a 10 per cent decline in visitors to some of the State’s top tourist attractions, such as the Cliffs of Moher, Bunratty Castle and the Guinness Storehouse.

The downbeat projection from the Association of Visitor Experiences and Attractions (Avea) was the latest evidence to suggest the tourism sector’s near seven-year expansion may be nearing an end.

The other major threat to the economy is the risk of a shock to our corporate tax take. Ibec this week warned the State could lose more than 10 per cent of it under new proposals to reform the global tax system. That would equate to more than €1 billion a year.

The Organisation for Economic Co-operation and Development is proposing a major shake-up of the current rules, which allow multinationals to book profits and locate patents in low-tax jurisdictions such as Ireland to minimise their tax bills.

In a more promising development for the economy, accounting and consulting firm EY is to create 600 new jobs across its network of 10 Irish offices over the next year in a move that will bring total headcount here to nearly 3,700.

Meanwhile, property price inflation slowed to 2 per cent last month, its lowest level in six years, while prices in Dublin continued to decline. The latest official figures show the middle price paid for a home in the 12 months to August was €264,852.

Banks to sell family home mortgages

Ulster Bank adopted the classic public relations ploy this week of waiting until budget day to announce plans to sell €800 million of mortgages, mainly issued on family homes, to US distressed debt specialist CarVal Investors.

The portfolio includes 2,800 owner-occupier loans with a face value of €715 million, where the average amount due in arrears stands at €36,000 and the average number of missed payments is 28 months, according to the bank.

Majority State-owned AIB is also preparing to offload thousands of distressed mortgages on family homes. The loan sale, which has been code-named Project Birch, is being planned for early next year, likely before the end of spring.

In corporate news, Irish meat-processing group Kepak has become the first European meat company to secure access to the US burger market, the largest meat market in the world with an estimated value of more than $122 billion (€111 million).

Elsewhere, International Airlines Group (IAG), which owns Aer Lingus, is to spend about €3 million a year offsetting greenhouse gas pollution from some services as it aims to hit net zero carbon emissions by 2050.

It is also investing $400 million in developing sustainable aviation fuel over the next 20 years.

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