Dublin was recently ranked 34th out of 231 global cities on the Mercer Quality of Life Survey 2017. It ranked higher than London, which came 40th, and every single other city in the UK and Ireland.
The city’s strength is wide-spread, and spans culture, the economy and the environment. Noel O’Connor, Consultant at Mercer Ireland, remarked that Dublin offers “an excellent choice of consumer goods, lower levels of air pollution, and a stable political and strong socio-cultural environment”.
As such, the Irish capital continues to be an attractive option for businesses seeking a base in north-west Europe, at a lower cost of living than London or Paris.
Indeed, the Irish economy as a whole has enjoyed strong growth in recent years. Last year’s 5.2 per cent growth rate meant that Ireland remained the fastest growing economy in the European Union for the third consecutive year.
Twilight for Dublin? Image: Hans-Peter Bock.
However, the UK’s decision to leave the EU may have already begun to hurt Ireland. Consumer spending growth slowed to 3 per cent in 2016, down from 4.5 per cent in 2015, with a significant dip in the second half of the year. Export growth was the joint lowest that Ireland has seen since 2008, at just 2.4 per cent.
The terms of the trade deal between Britain and the EU are yet to be agreed. Pat Leahy, political editor of the Irish Times, argues that the worst possible outcome would be no agreement between the Britain and the EU, meaning that World Trade Organisation rules (including tariffs of up to 50 per cent on agricultural goods) would apply. “Such an outcome would have the potential to devastate Irish exporters to the UK,” he says.
At a time when export growth is already slowing, this is bad news for the Irish economy. While Ireland’s main export market is the US, with whom it traded €26bn of goods and services in 2015, it still relies heavily on exports to the UK. However, it is worth noting that in the same year, Irish exports to Belgium exceeded the value of Irish exports to the UK.
Such a large trading relationship with the US means that the Trump administration’s preference for protectionist trade policies is of course another significant threat to the Irish export market.
Nobody’s quite sure about the big stick but it looks cool. Image: Robzle.
The Home Front
On the domestic front, the outlook is far more promising. The Economic and Social Research Institute is hopeful that the renewed boom in the construction sector could bring Ireland to full employment (defined as a level of unemployment below the post-crash low of 5.6 per cent) by the end of 2018.
The ESRI report found that the housing market is now the main driver of growth in the domestic economy, and emphasised the importance of managing this growth in a sustainable way. Dr. Kieran McQuinn, the report author, commented: “We’re treading a fine line between driving the economy to produce more houses and pushing it into overheating territory.”
Danny McCoy, chief executive of the Irish Business and Employers’ Confederation, is also optimistic about the prospect of domestic growth acting as a shock absorber against uncertainty in trade relations with the US and UK. He said:
“The economy is now facing some major external threats… [but] we are facing those threats from a position of economic and fiscal strength…
“We must use that position of strength to take more decisive steps to relieve competitiveness pressures which are within our control, by massively ramping up investment in infrastructure, R&D and education.”
Another gratuitous picture of Dublin. Image: Doyler79.
Invest to be the best
While Ireland is now running a budget surplus, and there are signs of strong domestic growth, it is understandable that industry leaders such as McCoy are calling for increased capital investment to protect against external shocks. Directly after the UK triggered Article 50 last month, industry leaders called on the Irish government to exert as much influence as possible to ensure that key exporters receive the best deal possible.
Paul Kelly, director of Food Drink Ireland, said: “The agri-food sector exports €4.1bn of food and drink to the UK and accounts for 43,000 Irish jobs. Agri-food is the Irish sector most exposed to trade disruption, and the Irish Government must do all within its control to ensure minimum impact to the free flow of goods.”
Despite these calls, the fact remains that, as just one of 27 EU states, Ireland has limited influence over the final outcome; this despite the significant implications for trade, immigration and the north/south border.
While the forecast for the export market is fairly bleak, the domestic economy and national budget are both strong. As this Irish writer can confirm, Dublin remains one of the best cities in the world.