I propose to take Questions Nos. 498 and 499 together.
The economic and political implications and timing of Brexit – and indeed the institutional arrangements between the UK and EU, and between Ireland and the UK remain unclear at this juncture. Notwithstanding this considerable uncertainty, the immediate implications for Ireland of the UK leaving the EU are being addressed by Government. While there is a lack of clarity as to how the negotiation process will proceed, the UK will remain an attractive market for many Irish companies, with a population of over 65 million people.
As a small, open, trade-dependent economy exchange rates, in particular, have a significant impact on Ireland’s national competitiveness. The importance of exchange rate fluctuations was raised earlier this year by the National Competitiveness Council in a Competitiveness Bulletin, published in April.
This Bulletin noted that volatility in exchange rates always presents challenges. The current situation of a weakened Sterling rate means that Irish exports are now relatively more expensive in the EU, while conversely, imports from the UK are cheaper. This naturally, presents particular challenges to Irish firms exporting to the UK.
The present exchange rate volatility highlights the importance of focusing on a wide spectrum of competitiveness policies – in particular policies to enhance competition and productivity. A competitive, sustainable, cost base can help to create a virtuous circle between inflation, wage expectations and productivity, and can provide a buffer against such exchange rate fluctuations and other uncontrollable, external factors.
In July of this year, the National Competitiveness Council published its annual Competitiveness Scorecard benchmarking report which provides an in-depth assessment of all aspects of Ireland’s international competitiveness performance. As well as highlighting Ireland’s strong overall competitiveness, this year’s report highlighted a range of competitiveness implications arising from Brexit – slower growth in the UK, the realignment of the deep inter-linkages between Ireland and the UK in terms of physical , economic and regulatory systems, both on and off the island, together with exchange rate fluctuations.
The Council also noted that Brexit brings into sharp focus the need for Irish based enterprise to step-up their own productivity and innovation performance to compete in international markets and for Ireland's policy system to be agile in responding to the competitiveness challenges and opportunities of the UK outside the EU.
The analysis contained in the Scorecard report is informing the development of the Council’s annual policy report Ireland’s Competitiveness Challenge 2016 which will shortly be submitted to Government for consideration. I understand that this report will include a chapter specifically dealing with the competitiveness implications of Brexit.
Furthermore, having met with the Chair of the Council earlier this year, and in light of the significant competitiveness impacts of Brexit, the National Competitiveness Council are undertaking a specific benchmarking exercise to fully understand Ireland’s strengths and weaknesses in the wake of the UK’s decision to leave the European Union.
Much like the NCC’s Competitiveness Scorecard report, this study will provide a comprehensive statistical assessment of Ireland’s competitiveness performance across a range of competitiveness metrics against both the UK and Northern Ireland (where data is available), and will highlight areas where policy attention should be focussed to enhance Ireland’s competitiveness. I expect that this report will be completed by the end of Q1 2017.
