Ireland could see silver lining from no-deal Brexit, says S&P

The State could see a silver lining from a no-deal Brexit with the labour intensive service sectors in line for a boost, according to ratings agency S&P Global.

A research note from the agency found that while the UK crashing out of the EU would have a significant negative impact on the Republic’s indigenous export sector, a silver lining could be found in the services sector.

“At 63 per cent of GDP, services dominate the Irish economy,” S&P said in its research note.

"We think a lot of the hiring activity taking place now is opportunistic, meaning that services jobs will be created wherever the strong candidates are going, and currently they are going to Ireland. We also think that the pace of employment growth in services is likely to survive a no-deal Brexit.

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“Indeed in some of Ireland’s largest sectors, including financial services, hiring may very well accelerate because of a no-deal outcome,” the analysts said.

The global ratings agency, owned by Standard and Poor’s, believes the most likely outcome is an orderly withdrawal of the UK from the EU, potentially delayed by an extension of Article 50.

And while there is no evidence that Brexit has cooled the Republic’s brisk labour market, S&P believes that a no-deal Brexit could have negative credit implications for some Irish companies.

“Supply chain disruption will be the key operational risk for Irish corporates . . . smaller Irish companies which rely more on a domestic manufacturing base and the UK export market will be more exposed and vulnerable to Brexit related disruption,” they said.

Agriculture

S&P said the State’s agriculture sector remained the most exposed to a disruptive Brexit. “Supply chain disruption and the advent of substantial tariffs will provide strong headwinds to the agri sector, which employs nearly 175,000 people, predominantly in rural Ireland,” it said, adding that some producers can’t diversify away from the UK because their product is perishable.

S&P presented its report at the opening of its new Irish office, which acts as its European headquarters. Frank Gill, a senior director in the European Sovereign Ratings Group, said that the company's stable outlook on Ireland does not change in the event of a no-deal Brexit.

S&P said it has 20 staff in the Republic, 13 of whom relocated from other offices around the world.

Talent pool

“We’re in Ireland for the long term,” said John Berisford, president of S&P Global Ratings. “We were attracted by the country’s talent pool, connections to the rest of our European network, and its strong track record as an operating environment.”

Asked about comments from Bank of America on Wednesday noting that it would not return their operation to the UK if Brexit was called off, David Gordon, S&P's country manager in Ireland, said the "drawbridge is already up . . . we're here now and we're here to stay".

S&P Global Ratings publishes more than 50 ratings on Irish companies, banks, infrastructure projects, structured finance transactions, in addition to the country’s sovereign rating.