UK searches for answers as May’s deal is crushed

Business Week: Also in the news were EU tax reform; the economy; tourism; and corporates

National and international newspapers in the UK, featuring front page reaction to the historic loss in the Brexit deal vote. Photograph: Bloomberg

National and international newspapers in the UK, featuring front page reaction to the historic loss in the Brexit deal vote. Photograph: Bloomberg

 

It was billed as an historic vote – one that would plot the path for the United Kingdom to throw off the shackles of the European Union and go boldly forth – but in the end it made history for all the wrong reasons.

UK prime minister Theresa May, having staked so much political capital on her withdrawal agreement with the EU, was left ashen-faced as the House of Commons swatted away months of pleading to deliver the largest defeat for a sitting government in history.

There were gasps in the house, and shock in Dublin and Brussels as the margin of defeat – some 230 votes – was revealed. Not many had expected May to carry the day, but few foresaw such a resounding rejection.

The following day, she saw off Labour leader Jeremy Corbyn’s motion of no confidence in her government – but by just 19 votes, relying on the support of the DUP in Northern Ireland to stay afloat.

With nothing left on the table and time ticking relentlessly away, May invited opposition leaders for talks to try and unearth some consensus before she returns to Brussels. In truth, with Corbyn refusing to engage, London was in chaos.

In Dublin, Taoiseach Leo Varadkar moved swiftly, doubling down on the need for a backstop at the Border, before confirming to the Dáil that plans for a no-deal Brexit were no longer being treated as contingencies.

The Government said it would begin to enact its enormous Brexit omnibus Bill, which covers all major areas of economic, social, transport, health and justice activities, and which will now dominate the legislative process during the first quarter of this year.

The Central Bank of Ireland said it was working with the Department of Finance on legislation to allow UK and Gibraltar-based insurers and brokers to continue to service Irish customers’ policies for a period of up to three years in the event of a no-deal Brexit.

Meanwhile, motorists who travel to Northern Ireland and Britain are to be issued with so-called “green cards” to prove they have valid insurance in this jurisdiction in what will be one of the first tangible impacts a no-deal Brexit is likely to have.

Over at Dublin Port, chief executive Eamonn O’Reilly said everything was being done to ensure the facility will be “as prepared as it is possible to be” for the challenges of a hard Brexit, but that the expected “chokepoint” would “inevitably lead to delays”.

It was left to Simon McKeever, head of the Irish Exporters’ Association, to say what everybody was really thinking. Ireland will be “screwed” in the event of a no-deal Brexit, which is now more likely than at any other time.

Economy under attack on all sides

With the threats of Brexit, EU tax reform, and simmering east-west trade tensions hanging over the State, the importance of a robust foundation to underpin the economy has never been so great.

Minister for Finance Paschal Donohoe this week hit back at the Irish Fiscal Advisory Council’s criticism of his budgetary policy, saying he would not apologise for using additional corporation tax revenue to fund vital infrastructural investment.

While the vast majority of the State’s corporate tax revenue comes from just a handful of multinationals, a report from law firm Baker McKenzie this week showed Chinese foreign direct investment into the State jumped 218 per cent to $100 million last year.

All the while the State continues to joust with the European Commission on tax reform, issuing Brussels’ plan to remove national vetoes on tax matters with a swift rejection. EU officials said the frustration of its reforms was damaging the bloc as a whole.

Back home, the latest inflation figures – one of the key indicators of an overheating economy – showed prices increased by 0.7 per cent in the year to December, marginally higher than the previous month.

The main driver was an increase in the cost of housing, water, electricity, gas and other fuels, which rose by 4.6 per cent in annual terms. This was mainly due to higher rents, which were 6.4 per cent higher.

On the upside, a record 31.5 million passengers passed through Dublin Airport last year, which was up 6 per cent on 2017. Aer Lingus, for one, will be hoping to reap some of those fruits. The airline unveiled a jazzy redesign of its aircraft this week, converting the trademark green livery to a mainly white design.

Contrasting weeks for Davids and Goliaths

Two of the Republic’s richest men – telecoms tycoon Denis O’Brien and financier Dermot Desmond – suffered blows this week.

Datalex, the Dublin-listed travel and digital commerce software provider for airlines in which Desmond is the largest shareholder with a 26.4 per cent stake, issued a profit warning that wiped 59 per cent off its share price in one day.

It said it would report a loss of up to $4 million for 2018 – some $20 million off what stock market analysts had been expecting.

O’Brien, meanwhile, saw the riskiest new bonds at Digicel begin trading at a 50 per cent discount this week after a leading credit ratings agency highlighted that the financing of his telecoms group was “untenable”.

Elsewhere, there was a win for Galway-based fast-food chain Supermac’s, following an EU judgment that forced global fast-food giant McDonald’s to relinquish its “Big Mac” trademark in Europe.

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