May strikes deal with DUP but uncertainty remains
Business Week: housing crisis, Google fined, and another cyber attack
Taoiseach Leo Varadkar with (from left) Bank of China’s Dublin branch manager Tian Jun; the bank’s chairman, Tian Guoli; and China’s ambassador to Ireland, Dr Yue Xiaoyong. Photograph: Maxwell
European Union competition commissioner Margrethe Vestager. Photograph: TJ Kirkpatrick/ew York Times
It took a little over a fortnight for Theresa May’s Conservatives to strike a deal with Arlene Foster’s DUP, but – while sterling may have climbed to its highest in a week – this was hardly the stability nervous businesses were hoping for before the election.
The deal will allow for an extra £1 billion-plus of spending in Northern Ireland, but the makeup of the government will do nothing to encourage firms with itchy trigger fingers to stay the course until the nuts and bolts of Britain’s European Union exit deal are thrashed out.
The next couple of months have been earmarked by the Government and IDA Ireland as a key period when the drip feed of financial institutions relocating to Dublin may become a deluge.
This week’s updates featured Barclays, which looks like it has settled on Dublin’s Dawson Street as the location for an EU hub. The bank agreed rental terms with Green Reit for most of the office space of a high-profile building under construction.
Elsewhere, Bank of China is said to be considering ways to “Brexit-proof” its new Irish business, which it launched on Tuesday, as a branch of the state-controlled lender’s UK subsidiary. The firm may have to set up a fully-fledged subsidiary in Dublin before long.
The balance to be struck for stakeholders seeking to woo investment without making a mess of the financial services sector is to ensure the State is protected by a robust regulatory regime without choking all the interest with reams of red tape.
Central Bank governor Philip Lane had to remind some quarters this week that it isn’t his job to promote the sector. His role, naturally enough, is to take care of the regulatory side of things.
Some have criticised the regulator as having had a somewhat heavy-handed approach so far, but Lane was having none of it. His strongly-worded letter to the chair of the Seanad Special Select Committee on Brexit served up a timely reminder of the regulator’s mandate.
Then there’s the other side of the coin. Spare a thought for our exporters, who will have to get used to bracing themselves as currency fluctuations in the coming months and years play havoc with their livelihoods.
To make matters worse, the State’s tax code is failing them, at least according to the Irish Tax Institute. It highlighted how a small group of multinationals are responsible for the lion’s share of export growth, innovation and corporation tax here.
The onerous task of untangling the housing crisis is one that has its roots in the financial crisis – and a new family finance report from Aviva this week showed many people are indeed still living with legacies from that period.
Generation X – people aged 35 to 54 - are more likely to be struggling than any other cohort across the Republic, according to the report, with the “squeeze” most keenly felt by those aged 35 to 44.
They bought properties at the height of the boom, which plunged many into negative equity, and they are now struggling to pay back hefty mortgages. They are also the most indebted, with more than three-quarters reporting average debts of €5,500 plus the mortgage.
For anyone lucky enough to have resisted the clamour to buy property before the crash, the vista facing them now isn’t exactly a bed of roses. However, the rapid acceleration in property prices and a surge in mortgage approvals does not mean another bubble is forming, according to the International Monetary Fund (IMF).
However, it did say the market required close monitoring, and that “persistent pressures could lead to imbalances, particularly given the lagged supply response”.
Then there’s the people at the coalface. One of the biggest contributors to the homelessness epidemic has been the lack of available rental accommodation. Many have pointed the finger at websites such as Airbnb for luring property owners out of the rental market and into the short-term letting game.
Officials from the company were before the Oireachtas housing committee this week to mount a strident defence of the role it plays in Irish society. For starters, they dismissed the idea that there are droves of property owners on Airbnb who would otherwise be in the rental sector.
A typical unit of housing in Dublin would need to be rented for more than 120 nights a year to beat the revenue of a long-term rental, they said, while only 550 entire-home properties were booked via Airbnb last year for more than 160 nights.
Furthermore, the “vast majority” of hosts on the site were letting their primary residences.
In aviation, plans for a second runway at Dublin Airport have barely got off the ground and there are already significant issues facing the €320 million project.
Local residents and others have challenged the development in the courts. Ryanair this week joined those proceedings as a notice party amid concerns that it needs the runway to go ahead should it want to further expand in Dublin.
The Government has sought to defuse the row by offering owners of homes near the runway 30 per cent above market value to sell up. Interested parties will have three years after the second runway opens, expected in 2021, to make up their minds.
There’s work taking place in the west also. However, the board of Ireland West Airport Knock called on the Government to provide financial incentives to maximise return on the development of industrial land adjoining the facility, which has been designated for fast-track planning approval.
Meanwhile, in Waterford, it emerged that Aer Southeast, a new airline that has been selling flights to Britain from the Republic, has yet to apply for a licence to do so from the State’s aviation regulator.
EU competition commissioner Margrethe Vestager is keeping busy these days. Following her investigation into Apple’s activities in the Republic, it was Google on the hook this time.
The European Commission fined the global giant €2.4 billion for breaking competition rules by abusing its monopoly over internet search to unfairly promote its own shopping comparison service.
After a seven-year investigation, Google was given 90 days to put its search engine right or face daily fines of up to 5 per cent of the average daily turnover of Alphabet, Google’s parent company.
The fine, the largest yet in an anti-trust case, represents close to 2.5 per cent of the company’s yearly sales €89 billion in 2016. The EU maximum penalty is 10 per cent of annual sales. Google may challenge the decision in the European Court of Justice.
Finally, and in news we seem certain to be hearing more of in the coming years, a major global cyber attack disrupted computers and caused havoc with a virus similar to the ransomware attack last month.
In the Republic, US pharmaceutical company MSD said its IT systems had been “compromised” by the suspected “Petya” virus. It had a combined turnover in the State of €4.7 billion last year.
The global container shipping company Maersk Line also confirmed its UK and Ireland systems had been hit, while UK advertising agency WPP, which owns JWT, Ogilvy & Mather and Young & Rubicam, and which has offices in Dublin, was hit, too.