Players sit down for second hand of Brexit poker game
Business Week: also in the news was house prices, mortgages, INM, and Budget 2018
UK secretary of state for exiting the European Union David Davis (left) and the European Commission’s chief Brexit negotiator Michel Barnier at the start of a first full round of talks on Britain’s divorce terms from the European Union. Photograph: REUTERS/Yves Herman
Left: Robert Pitt, CEO and Leslie Buckley, chairman at an Independent News & Media egm at the Alexander Hotel. Photograph: Cyril Byrne / THE IRISH TIMES
From left: Martin Shanahan (CEO, IDA), Minister for Finance Paschal Donohoe, Prof Brigid Laffan (director Shumann Institute) and Joe Mulholland enjoy the sunshine at the MacGill Summer School in Glenties, Co Donegal. Photograph: North West Newspix
“It’s time to get down to work and make this a successful negotiation,” declared UK Brexit secretary David Davis as he arrived at the European Commission’s headquarters in Brussels for the second round of divorce talks this week.
Officials and diplomats – whisper it – expressed cautious optimism that progress can at last be made. Davis’ brief visit got off to an unfortunate start after a photograph of him and his team sitting opposite their EU counterparts was widely ridiculed on Twitter.
While the EU Commission negotiators each sat with a stack of briefing papers in front of them, the UK delegation had none, leading to speculation as to whether they had actually brought any. The British later said the documents had been in Davis’ bag.
Later in the week, Davis’ cabinet colleague Liam Fox, who is the UK’s international trade secretary, set alarm bells off in Dublin when he said Britain “can of course survive” without securing a trade deal with the EU before both parties go their separate ways.
It’s likely Fox was playing mind-games with the EU negotiators, knowing full well that you don’t sit down to play poker and reveal where you’re unwilling to go with the stakes before a bet has been placed.
At least that’s what everyone will be hoping, particularly after ratings agency Moody’s warned that the UK faces “outright recession” in the event it leaves the EU without a deal in place.
Moody’s said its base case remains that both sides will come to an agreement covering most – but not all – of the current trade arrangements. However, it said the probability that negotiations could end with no agreement was still “substantial”.
Meanwhile, Dublin is still working hard to reel in as many of London’s floundering fish as it can. For one, Morgan Stanley is to apply for a licence to set up a fund management company here to maintain access to investors in the EU after Brexit.
A number of other companies, including investment group Legg Mason, are planning to set up similar structures in Ireland, which would typically employ between 20 and 50 people to show they’re not brass plate operations.
There was more good news as two of the US’s biggest banks signalled plans to expand in Dublin as they prepare for Brexit, in what is likely to result in the addition of hundreds of financial jobs.
Citigroup, which has chosen Frankfurt as its future EU equities and bond trading centre, is looking to add to its existing 2,500 workforce in the Republic. Bank of America is also planning to expand here.
Of course, Brexit’s general impact on the Republic is by all accounts likely to be harmful. It emerged this week that the number of British people flying into Dublin Airport is “falling like a stone” amid growing uncertainty about its impact on air travel.
Kevin Toland, chief executive of DAA, the State company that runs Dublin and Cork airports, said inbound trips from the UK are down 7 per cent, and that growth in other business has been concealing the decline.
There was an extraordinary development at Independent News & Media (INM) on Monday as the newspaper publisher had a week to forget.
The organisation’s chief executive Robert Pitt indicated that he might vote against resolutions that will be put to the company’s shareholders at its agm in Dublin on August 23rd.
It would be unprecedented for a chief executive of a publicly listed company to vote against a resolution at his own company’s agm.
It’s unclear what resolutions Pitt might oppose, but his position in relation to the re-election of Leslie Buckley as chairman, and INM’s six nonexecutive directors, are thought to be issues he may have a beef with.
Pitt clashed with Buckley last year over a proposal for INM to acquire Newstalk, the radio station owned by Denis O’Brien, who is also INM’s largest shareholder. Pitt wanted to offer a lower price than a valuation obtained by Communicorp, Newstalk’s owner, while Buckley – an associate of O’Brien’s – wanted to go with the higher bid.
All of that served as a prequel to a profit warning issued by the company on Wednesday. Sources signalled pre-tax earnings will fall about 20 per cent below market expectations.
INM blamed falling newspaper circulation, advertising revenues and Brexit “uncertainty”, but the statement sent the company’s stock down as much as 19.5 per cent before closing off 14.1per cent at 11c, leaving its market value at €153.1 million.
The week wasn’t much better out in Donnybrook as RTÉ confirmed it made a loss of almost €20 million in 2016. “Much is now at risk,” said a grim director-general Dee Forbes, who also mentioned Brexit as part of the reason for the bleeding.
The hype surrounding the property market got its latest injection on Tuesday as Daft.ie’s wealth report revealed the most expensive parts of the State in which to buy houses.
The plushest area was Sandycove in south Dublin, where the average valuation is almost €790,000. The report also found prices in Foxrock and Mount Merrion to be in excess of €750,000.
The report also suggested that as many as 1 per cent of all homes in the State are worth €1 million, which translates into more than 3,800 “property millionaires”.
Separately, the extent of the challenge facing first-time buyers was laid bare as property company Ires Reit completed the construction of 68 apartments in Sandyford, Dublin 18, which may set a record for rents in the area.
The picture isn’t any prettier for thousands of people in negative equity. It emerged this week that Permanent TSB’s €1.5 billion of troubled mortgage loans are most at risk of being sold.
The 75 per cent State-owned bank, which has the highest percentage of non-performing loans among Irish lenders, has committed to outlining how it plans to deal with the situation by the end of September.
All that being said, there is a palpable sense around Dublin that a lot of construction is underway, and builders may be in line for a pay rise if the Oireachtas approves a Labour Court recommendation.
Building workers could see their wages rise by 10 per cent after the court recommended a series of new minimum pay rates for skilled and unskilled workers in construction to Minister for Jobs Frances Fitzgerald.
MacGill Summer School
Minister for Finance Paschal Donohoe was in Glenties this week where he told the MacGill Summer School that the economy still faces the threat of overheating before launching a blistering attack on left wing politics.
Left wing politics and policies could “break this country”, he said. “Despite the nasty tone of many in Irish politics, it is my job to cut through the noise and do what is right, not what seems to be right to some people who shout the loudest.”
Donohoe, who outlined the summer economic statement last week, has committed to spending €500 million on capital infrastructure in October’s budget. This week, Engineers Ireland called for a single State body to take responsibility for key projects.
Building homes, schools, water treatment, roads and railways are facing “frustrating” delays, they said, which are holding up infrastructure construction despite some progress.
Separately, the State was said to be nearing an agreement with Apple on how to manage back tax it has been ordered to collect from the iPhone maker, even as it appeals a 2016 European Union ruling that the money is owed in the first place.