Brexiteers round on Bank of England’s ‘Project Fear’ analysis

Business Week: also in the news were mortgage lending rules, tracker fines and Facebook’s pay

Hardline Brexiteers in the UK were raging this week after an analysis by the Bank of England concluded that a chaotic exit from the European Union in March could plunge Britain into its worst economic slump since the second World War.

It was followed by all the usual bluster, with the report dismissed as another example of "Project Fear". Conservative MP Jacob Rees-Mogg accused the bank's governor, Mark Carney, of a "failure to understand his role", while former foreign secretary Boris Johnson said the bank had always "got it wrong".

Former Ukip leader Nigel Farage also got in on the act: "Folks, we've heard it all before," he said. "These people can't forecast what's going to happen next Thursday, let alone what the UK economy is going to be in 2030."

The Bank of England had warned that economic growth could fall by 8 per cent and that sterling could lose a quarter of its value. Such a scenario would be catastrophic for Irish exporters and could push the economy here into recession.


It’s worth pointing out though that the report was an analysis of what might happen in certain scenarios rather than a forecast of what will happen. But it was nonetheless a boost for UK prime minister Theresa May ahead of the Commons vote on her deal on December 11th.


May’s cause wasn’t helped by yet another unwanted intervention by US president Donald Trump who said the deal was a good one for the EU but not the UK, and that it could prevent the two countries striking a trade deal.

May – whose political future could well be tethered to the fate of her deal – is still faced with an enormous task. Reports this week suggested as many as 100 MPs from her own party are set to defect and join the Labour Party and the DUP in voting the deal down.

If that happens, May has said that she will activate planning for a no-deal Brexit. The Brexit cloud hanging over the Irish economy was one of the reasons why the Government was strongly criticised by the State’s budgetary watchdog for “repeatedly” missing its own financial targets and for failing to manage the public finances in a “prudent” manner.

The Irish Fiscal Advisory Council said the Government’s underlying budgetary position had effectively stalled since 2015, despite the favourable economic climate. Budget 2019, which allows for a €4.5 billion package of spending increases and tax cuts next year, was €1.1 billion above target, it said.

Lane’ only has soothing words for house hunters

Central Bank of Ireland governor Philip Lane this week expressed sympathy with house hunters who are struggling to meet the regulator’s mortgage rules as they attempt to get on the property ladder.

“I am fully sympathetic that individuals may get frustrated,” he said. “They may say: ‘I know my personal preferences, I know can I safely pay back more debt because I’m a person who may choose not to have a car, may choose to sacrifice going out and having a more active social life, because I want to own a home.’

“I’m sure there are lots of people like that. Unfortunately, the way we have to run it, we can’t customise it to every individual. We have these rules and then we do have the exemptions.”

Lane was speaking after the Central Bank elected to leave its lending restrictions unchanged after a review. The answer to affordability concerns, he said, was “a sustained and substantial expansion in housing supply”.

‘Very disappointing’

Brokers Ireland, which represents 1,250 mortgage brokers, described the outcome of the review as “very disappointing” and said the rules would leave aspiring homeowners exposed to high rents.

One of the issues fuelling the housing crisis is the influx of big tech companies, but it emerged this week that IDA Ireland, the body that seeks to attract foreign investment, has been downplaying the issue to multinational companies.

A series of briefing documents released under the Freedom of Information Act showed the IDA instructed its staff to say the State’s housing shortage was “not unique to Ireland” and that rents in regional locations were “very competitive”.

Kevin Langan’s new venture

Supply of houses might be helped by a new venture owned by businessman Kevin Lagan, which hopes to build 1,500 homes next year and is eyeing areas most hit by the housing shortage.

Fasthouse, a specialist in constructing rapid-build homes, is in talks with contractors in the Republic about the possibility of joining forces to build homes in places where demand for housing is high, particularly in the greater Dublin area.

Meanwhile, the Central Bank confirmed that some of the six Irish lenders under investigation in relation to the State’s €1 billion tracker mortgage scandal can expect to receive multimillion euro fines next year.

Separately, Permanent TSB confirmed that €1.3 billion of its problem mortgages will be refinanced in bond markets to shift them off its books.

Facebook Ireland and its staff rake it in

Envious glances were cast in the direction of Facebook Ireland this week after it emerged that directly-employed local staff received more than €150,000 each last year in remuneration.

Accounts filed this week show that its revenues rose by 48 per cent last year to €18.7 billion. They also showed that the 1,008 staff directly employed each received an average salary of €95,766, which climbs to €154,000 when you add in all the extras.

The tech giant’s Irish arm paid €38.3 million in tax last year on profits of €251 million.

Meanwhile, there was a win for the Government in Brussels as the prospect of an EU tax on digital sales receded after an alliance of Ireland, Sweden, Denmark and Germany blocked the proposal.

The Government feared it could hit tax revenues from internet giants based here and had argued that the matter should be dealt with by the OECD, which is working on proposals to deal with the issue on a global basis. The 3 per cent tax would be payable where the user of the technology was based, rather than the location of the company’s headquarters.

Finally, Denis O'Brien's telecoms group Digicel has indicated to creditors that it may not meet its debt burden target for its current financial year, as the sale of unwanted assets drags on.