As the United Kingdom (UK) continues to reel from the economic fallout of Brexit, its neighbor, Ireland, is experiencing a boom. While Brexit uncertainties persist, Ireland’s economy is thriving, with record low unemployment rates and impressive GDP growth. The contrast between the two neighboring countries couldn’t be more stark. In this article, we explore the reasons behind Ireland’s success and examine how it is managing to thrive despite the economic challenges posed by Brexit.
Ireland’s economy is expected to be the best-performing in Europe for 2022 and 2023. According to the European Commission, Ireland’s economy will grow by 4.9% in 2023. This is a conservative forecast, as the country’s Economic and Social Research Institute (ESRI) think tank predicts the economy will grow by 5.5% this year and 6% next year. Ireland has a range of sectors that have flourished in recent years, capitalising on the country’s access to a market of 450 million people and its 12.5% corporate tax rate. Ireland’s tech and pharma sectors have seen major international companies set up operations in the country. Ireland has also drawn international companies to establish subsidiaries in the country because of its low-tax regime, educated workforce, stable political background and its use of the English language. There has been a “steady trickle” of companies moving operations from the UK to Ireland. Dublin’s financial sector has been a big winner, and the city attracted 135 financial companies between mid-2016 and early 2021 – around a quarter of all finance firms’ Brexit-related moves, according to a report by the think tank New Financial.
The UK government often blames the ongoing recovery from the pandemic, a global supply chain crisis and the war in Ukraine for the poor state of its economy. However, many economists argue that the major cause is Brexit. The Office for Budget Responsibility (OBR) predicts that both UK exports and imports will now be 15% lower in the long run than if the UK had remained in the EU, and the pound remains a fifth weaker than the dollar compared with before the referendum. Recent months have seen forecast after forecast portending doom for the UK economy. The OBR predicted in March that the UK economy would shrink by 0.2% this year, faring worse than the European Commission’s predictions for all other major European economies. The OECD also projected in March that the UK economy would shrink 0.2%, the poorest performer in the G20 besides Russia (whose economy will shrink 2.5%).
Ireland, the only EU country with which the UK shares a land border, was repeatedly condemned as doomed during the Brexit negotiations if the UK received a poor deal from Brussels. “The British commentariat was genuinely convinced that Ireland would be clamouring to leave the EU as soon as the UK left because 99.87% of Irish exports – which consist entirely of Guinness and shillelaghs – went to the UK,” said Dr Brian Lucey, an economics professor at Trinity College Dublin. Ireland’s membership of the EU, and of its customs union in particular, has “allowed Irish businesses to hugely expand their reach, and not just rely on the big neighbour next door”, said Lucey.
In 2021, UK trade only accounted for 13% of Irish exports and 20% of Irish imports. These statistics also mean that Ireland is one of just seven EU countries that the UK has a trade surplus with, which was worth €5.4bn in 2020. The UK’s departure from the customs union saw its trade surplus with Ireland shrink to €1.3bn in 2021. “It is very strange to us here in Ireland to witness such an own goal,” said Lucey. “With the UK, it’s literally a case of ‘you need us more than we need you’ because Ireland is one of the few countries with whom the UK runs a good trade surplus.” Irish exports have been “powering ahead” into the UK since it left the customs union, added Lucey.
The reality is that Ireland’s economy is thriving while the UK’s economy is suffering due to Brexit, a global supply chain crisis and the ongoing pandemic. Ireland has benefitted from its membership of the EU and its customs union. Large international companies have set up operations in the country, and Dublin’s financial sector has been a big winner. Meanwhile, the UK’s trade surplus with Ireland has shrunk, and its economy is predicted to shrink by 0.2% this year, faring worse than the European Commission’s predictions for all other major European economies.
