Cliff Taylor: Don’t panic if Brexit happens – Ireland must not follow

From day one all arms of Government and State agencies must sell the message that there is no question we would follow Britain out

Official Ireland is ready. If Britain votes to leave the EU a massive damage limitation plan will roll into action. The message will the same as that on the cover of the Hitchhiker's Guide to the Galaxy. "Don't Panic."

The theme of the Irish comments if Britain does vote to leave would likely be to regret the British decision and promise to play a full part in the negotiations to come. But weaved throughout this will be a clear message – Ireland is not going to follow Britain out.

This is the right thing to do even if nobody really has much of a clue what Brexit will mean. It will take years to negotiate the terms of Britain's exit – the two-year term intended for such talks could well be too short. Sterling may collapse on the markets, though currency trends are notoriously difficult to predict.

The only thing for sure is that Brexit would bring huge uncertainty, and this in itself is damaging because it stops people making decisions – to invest, to spend and so on. In turn that hits growth and economic prospects.


For Ireland, Brexit would raise the most fundamental question. Will we follow and leave the EU ourselves?

To us the “no” answer may seem obvious. To others it won’t be.

The idea from day one will be to have all arms of government and the relevant State agencies, such as the NTMA and the IDA, selling the message that there is no way we will follow Britain out. We will remain “fully committed” to the EU.

We need this message to be believed. It is vital for our drive to attract foreign direct investment (FDI) into Ireland because EU membership is the cornerstone of this.

To protect our current flow of FDI the business world needs to believe that Ireland will remain anchored in the EU.

We also need big fund investors who buy our government debt – effectively lending us money – to accept that message. There have been some small trembles in the government bond market in recent weeks, and signs that a lot of investors are sitting on their hands and waiting to see. But watch the market in the run-up to the vote. If investors start to really fear that Britain will vote to leave then things will get interesting.

Firing line

One of the things in the firing line if Brexit does happen will be our government bonds. The markets know that Irish growth will be affected if this happens, and lurking in the background will be questions about whether we might follow Britain out, which would presumably involve abandoning the euro.

This might seem mad from a Dublin viewpoint, but if you are based in New York or Geneva and are lending money to Ireland for 10 to 15 years by buying our bonds, you might just decide to put your cash somewhere else.

ECB buying under its current quantitative easing programme may help in the short term, but in bond markets it is the long term that matters.

In the welter of analysis, GDP forecasts and talk about what would happen to the Border, we should not lose sight of one central fact. If Britain leaves then there will be speculation about the future of the EU itself and whether other countries might follow.

Anti-EU sentiment has found a political voice in many countries – the Netherlands, for example, and France. A key strategic objective for us will be to hit on the head from day one any speculation that we might follow Britain out of the EU.

The negotiation of Britain’s exit terms would be a horrendous task.

First there will probably be a delay as a new British prime minister is chosen, before Britain formally notifies the EU of its decision to leave.

Then nobody knows what Britain’s negotiating approach will be, and how it will balance the economic need for access to the single market with the political imperative of being more “independent”.

And will the EU take a pragmatic approach or try to “ punish” Britain to discourage others from following?

For Ireland this risks a prolonged period of dangerous uncertainty about our trading terms with Britain, the largest market for many of our exporters and a key market for imports. Some 40 per cent of our food exports go to the UK, for example. So if you are a big food producer do you push forward with new investment and employment plans or do you wait to see what terms will apply as you sell to your biggest market?

For the businessperson, the investor and even the consumer, uncertainty is a curse. And the problem with Brexit is that the vote is only the start of it.

It is not as if, on June 24th, we might wake up to an unwelcome new reality if Britain votes to leave. It is that we simply won’t know what it will mean – and may not do so for a period of years.

And so the strategy of telling people it will be okay and that Ireland remains committed to the EU is just the first step, albeit a vital one.

After that the implications of a Brexit will only unfold over months and even years. It may not take quite as long as the super-computer Deep Thought in the Hitchhiker series took to work out the meaning of life, the universe and everything ( 7.5 million years and the answer is 42). But Brexit would cover everything in a damaging fog of uncertainty. Let's hope it does not happen.