Brexit shaping up to be more Armageddon than Mad Max
Business Week: also in the news were Iran sanctions and a raft of corporate news
Sterling sank to a nine-month low against the euro this week on fears of a “no deal” Brexit.
David Davis, the then-Brexit secretary, assured us in February that the UK was not seeking a dystopian “Mad Max-style” Brexit; these days, it seems more reminiscent of Armageddon.
What with the odds of a “no deal” Brexit now at 60-40 – if UK international trade secretary Liam Fox is to be believed – and recent talk of the stockpiling of foods and medicines, Britain looks more like it’s hunkered down in a bomb shelter than “taking back control”.
Certainly, the markets are spooked. Sterling sank to a nine-month low against the euro this week, bringing it over 90p. That’s good news for cross-Border shoppers but calamitous for Irish exporters, and particularly for those reliant on the UK.
It’s not just the whims of currency fluctuations that exporters are exposed to either. Should the UK follow through with its plan to leave the customs union in March, there will be massive delays at the Channel Tunnel, its de facto EU border in Dover.
German Irish Chamber of Industry and Commerce chief executive Ralf Lissek said delays at the land bridge between Britain and mainland Europe will be “hugely significant” for our exporters, with 80 per cent of our continent-bound produce going through it.
The European Commission has proposed new shipping routes from the Republic to Belgium and the Netherlands, but that would increase transit times more than threefold and mean Irish food would be spoiled before reaching its destination. France is, of course, closer to us, but the commission has thus far overlooked it, possibly due to recent congestion at its ports.
The Border remains the unsolvable riddle in all of this, and, judging by the British government’s request that Dublin ease off on its emphasis on peace in Northern Ireland during talks, we are no closer to finding a solution.
British prime minister Theresa May has reportedly stepped up preparations for the UK leaving the bloc without a deal, instructing her officials to make contingency plans to ensure the Border is free of customs checks and police should it come to pass.
Meanwhile, many British firms are continuing to abandon ship. The Central Bank said Brexit-related applications for authorisation are running at a “very significant level” with both large and small institutions in touch with the regulator.
The influx of financial institutions is said to be behind a 15 per cent inflation of wages in the sector. It’s not just bankers either. More than 9 per cent of all solicitors listed in the Republic are now lawyers from England and Wales.
“I am asking for WORLD PEACE, nothing less!” tweeted Donald Trump this week, sounding more like a character from the 2004 spoof Team America than the US president.
Trump was referring to the return of blanket sanctions on Iran on the back of his assertion that the Gulf state had reneged on the nuclear deal. Iran now faces restrictions on the purchases of dollar banknotes, and cannot trade in gold and other precious metals. Trump also banned imports of Persian carpets and pistachios to the US.
Not content with just US hands around the throat of the Iranian economy, Trump also threatened America’s trading partners that anyone doing business with Iran would not be doing business with the US.
Despite calls by the EU’s foreign policy chief for Europeans to increase business dealings with Iran, German carmaker Daimler said it was halting its business activities there within hours of the sanctions taking effect. That being said, both Beijing and Berlin defended their business ties with the Persian state.
In Dublin, the Government said Irish companies are unlikely to get caught in the crossfire due to the relatively low level of trade between the two countries, but recent moves to exploit the lucrative market of 80 million people are likely to be affected.
The sanctions are one of several issues currently souring US relations with Turkey, which relies on its neighbour for about half its oil supply. The Turkish lira dropped to a record low this week as pressure mounted on Ankara to resolve matters with the US.
It was a busy week for Trump, who also slapped Moscow with sanctions over its alleged use of chemical weapons in Salisbury. The Russian rouble extended its steepest slide in almost two years and government bonds slumped.
The fluctuation of the pound caused a 0.6 percentage point dip in the trading margin of Kerry Group’s consumer foods business to 7 per cent, but its €30 million Brexit war chest means the group is confident Brexit will have a “limited impact” on it.
The company, which produces brands including Dairygold, Low Low, Denny and Galtee, said trading profit increased by 0.5 per cent to €340 million during the first six months of the year.
At Glanbia, finance director Mark Garvey said the imposition of trade tariffs around the world could cause disruption to dairy prices and affect growth. The company posted a 14.5 per cent year-on-year fall in profits during the first six months of 2018.
It was a bad week for low budget airline Ryanair as staff in Ireland, Germany, Sweden, Belgium and the Netherlands held a 24-hour walkout over pay and conditions. Hundreds of flights and thousands of passengers were affected.
It was worse still for Irish-Swiss baker Aryzta, which had one of its darkest days since it began trading almost 10 years ago after Credit Suisse analyst Alan Erskine suggested the company may be “forced” to sell assets and that he no longer sees a profit recovery.
Investors in the maker of Cuisine de France face having their holdings diluted by more than 40 per cent should the group decide to issue new shares, analysts said.
Elsewhere, Paddy Power Betfair reported that profits rose 4 per cent to £106 million during the first six months of the year after the World Cup boosted first-half revenues by £23 million.
Finally, net profits at KBC Bank Ireland fell by a third during the first half of 2018 compared with the same period last year, while it also announced details of an agreement with Goldman Sachs to sell a €1.9 billion loan portfolio.