Brexit poses a serious threat to economic prosperity

Ireland’s failure to invest sufficiently in infrastructure and its inability to tackle the under-resourcing of the education sector pose risks to the country post-Brexit, according to a new report.

The National Competitiveness Council (NCC) warns Ireland must do more to put plans in place to enhance our competitiveness and to prepare with the consequences of the UK leaving the European Union.

It says that while Ireland ranks favourably currently against our near neighbour in international competitiveness rankings, the country’s strong macroeconomic performance may have led to an overstating of our underlying position. It says that it may lead to insufficient attention being given to clear deficits evident in infrastructure and investment in skills and innovation.

The council's chairman, Prof Peter Clinch, said the economy may be at its strongest since the onset of the downturn, but that Brexit posed a "serious and imminent threat" to Ireland's economic wellbeing.

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“If we do not urgently seize the opportunity to put in place more solid foundations for growth, we are undermining Ireland’s future competitiveness and putting at risk our future prosperity,” he said.

The report notes that Brexit is likely to affect UK competitiveness through increases in the cost of trade, declining growth and investment, loss of market size and reduced ability to attract and retain talent.

However, it adds that in the run-up to, and post-Brexit, the UK was likely seek to counterbalance this by intensifying its investment in infrastructure, enhancing and developing its tax and non-tax offering for enterprises, developing its skills and innovation base, and expanding its reach into new and existing markets.

Tax base

In addition to highlighting a need for increased capital investment spending and funding for the education sector, the report also points to a need to ensure the country’s fiscal position remains sustainable by avoiding any narrowing of the tax base.

“It is important that the taxation system is balanced, broad and provides certainty in a manner that supports and rewards employment, investment, innovation and entrepreneurship,” the report says.

In addition, the council calls for better support for indigenous industries and start-ups by helping them to develop new products, markets and sectors, and providing competitively priced source of finance for growth.

The study adds that while Ireland’s productivity performance is strong, the narrow base of sectors driving performance leaves the country vulnerable to shocks.

“Only a renewed commitment to constantly improving our competitiveness can enable firms based in Ireland to compete in international markets and to provide Ireland’s people with the opportunity to improve their living standards and quality of life,” the report says.