Merkel and Varadkar brainstorm as May’s Brexit struggles continue

Business Week: also making the news were Apple, a budget surplus, Nama and housing

German chancellor Angela Merkel and Taoiseach Leo Varadkar. Their telephone call this week lasted for 40 minutes. Photograph: Getty Images

German chancellor Angela Merkel and Taoiseach Leo Varadkar. Their telephone call this week lasted for 40 minutes. Photograph: Getty Images

 

It was straight back down to business for German chancellor Angela Merkel this week as she requested a phone call with Taoiseach Leo Varadkar to try and thrash out how the European Union might salvage its Brexit deal with the UK.

The call lasted for 40 minutes. “It was an opportunity to kind of brainstorm a bit as to what we could do to assist prime minister Theresa May in securing ratification of the withdrawal agreement,” Varadkar said afterwards.

The two leaders predictably agreed to stand by the agreement, with more offers of “reassurance” for the UK.

May will learn the fate of her deal in less than a fortnight, but if she was hoping the season of goodwill might change her fortunes, she will have been sadly disappointed.

The US ambassador to London, Woody Johnson, cast doubt on the chances of striking a trade deal with the British if the deal is ratified, and said the UK was “in need of leadership”.

Meanwhile, DUP Brexit spokesman Sammy Wilson said there was no way his party would back the deal, and that Northern Ireland farmers and businesses should be “totally relaxed” by the prospect of a no-deal scenario.

Somebody should tell this to the Police Service of Northern Ireland, which was this week reported to have asked for reinforcements from Britain to deal with any trouble that arises from a hard border.

Almost 1,000 police officers from England and Scotland are to begin training for deployment in the North in case of disorder from a no-deal Brexit, according to the Guardian.

Elsewhere, UK environment secretary Michael Gove said a no-deal Brexit could lead to tariffs of more than 40 per cent on meat and would trigger a “turbulence” that would damage British farming.

At home, Ryanair secured a UK-operating licence, meaning it can continue domestic flights there and flights from the UK to outside the EU in the event of a no-deal Brexit.

Separately, the IDA said Brexit has prompted 55 companies with the potential to create up to 4,500 jobs to invest here. More could be on the way, too, with the State planning to open more than a dozen new missions in Latin America, India, Africa, the Middle East and New Zealand.

Apple this week cut its revenue outlook for the latest quarter, citing steeper-than-expected “economic deceleration” in China and emerging markets. Photograph: Getty Images
Apple this week cut its revenue outlook for the latest quarter, citing steeper-than-expected “economic deceleration” in China and emerging markets. Photograph: Getty Images

Apple adds to global economic woes

The world of finance can be a fickle one at times, as tech giant Apple learned this week.

Just five months on from all the fanfare surrounding the announcement that it had become the world’s first trillion dollar company, its shares suffered their biggest one-day drop in five years, closing almost 10 per cent down on Thursday.

That followed the iPhone maker’s first cut to its revenue forecast in 16 years. It was the latest sign of investor unease in the global economy, which has been rocked in recent weeks by geopolitical tensions and the government shutdown in Washington DC.

Days after Apple’s warning, the department of finance’s chief economist John McCarthy confirmed that about 7 per cent of the State’s total tax take, equating to €4 billion, now comes from just 10 companies.

This posed a risk to the exchequer, he said, particularly in the context of a downturn in corporate profitability or a change in trading conditions globally.

The business tax generated a record €10.4 billion for the Government last year – €1.9 billion more than had been expected. It accounted for 19 per cent of the State’s total €55 billion tax take last year, which is out of kilter with competitor countries.

On the plus side, the exchequer figures overall showed the State achieved a modest surplus of just over €100 million last year, the first time this had happened since 2006.

All in all, though, global efforts to tackle tax planning by big multinationals are continuing apace. US companies repatriated more than half a trillion dollars of cash they held overseas in 2018 following US president Donald Trump’s new tax laws.

These regulations allowed the US government to tax profits accumulated overseas, regardless of where the money was held. Prior rules allowed companies to “defer” US tax on worldwide profits unless they repatriated the money.

On this side of the Atlantic, the European Commission is developing a plan to end national vetoes in some decisions on tax policy, a move which the Republic is likely to strongly oppose.

The move is seen as a response by the commission to intense pressure from a number of member states, particularly France, to take more aggressive action to close off tax avoidance schemes by major multinationals. Ironically, Ireland will have a veto on the commission’s plan.

House prices to rise this year

Nama, oft criticised for its role in the housing market, this week published figures that said it had provided funding for 9,700 residential units since 2014, with an additional 3,000 under construction or having been approved.

The agency was given the task in 2015 of delivering 20,000 houses and apartments by 2020 under a plan to help the State deal with the housing crisis. It said planning permission had also been granted for another 6,400 units on sites that it manages.

In a trading update, Irish builder Glenveagh Properties said it had acquired a €25 million site in Co Cork capable of delivering about 500 homes from Nama, which also said it expects to return a surplus of €3.5 billion to the exchequer by the time it completes its work.

A report this week by Davy and property website MyHome.ie, which is owned by The Irish Times, suggested strong demand and rising wages will drive up house prices by 5 per cent this year, assuming Brexit uncertainty is resolved. That’s a big assumption.

Finally, the volume of mortgage approvals fell in November compared to the previous month with first-time buyers and movers receiving fewer offers of credit from lenders. That bucked a trend in the previous two years whereby approvals rose in November.

However, the level of approvals was up year on year, according to the figures from the Banking and Payments Federation Ireland.

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