Rarely have the economic prospects of the State and our closest neighbour seemed to be on such divergent paths. Or, at least, not in their current direction, with this State maintaining relatively solid financial stability while Britain is tossed in an economic tempest.
We should have some inkling of how they feel over there. It can’t be fun. There have been many times in recent decades when Ireland flailed about while the British steered a steadier course.
From the mid to late 1980s, Ireland had a painful economic reckoning while, across the water, unemployment halved. The British economy dipped 4.7 per cent in the global crisis of 2008 and 2009 but the Republic’s shrivelled more than twice as much. The following year, as Britain’s economy recovered, this State entered a sovereign bailout. The British loaned us £3.2 billion (€3.6 billion).
Even when the Republic was swilling its way through the Celtic Tiger years, the British economy was still purring along nicely and, as we now know, far more sustainably than ours. Ireland’s recovery from the last crash was impressive compared to the UK’s more sluggish growth rates of the David Cameron years, but they weren’t truly divergent paths. More like slightly different routes.
But now, with its growing strikes, economic angst and desperate dance to mollify the gods of the capital markets, observing Britain is like watching flames lick beneath your neighbour’s door. The correct reaction is one of deep concern. They say they don’t need help. Surely, then, they know what to do to dampen the blaze. If they don’t, could it spread?
Ireland announced on Wednesday an exchequer surplus of €5 billion and a 22 per cent rise in tax revenues. Tougher times lie ahead but Michael McGrath, the Minister for Finance, and Paschal Donohoe, the Minister for Public Expenditure, still looked pretty pleased with themselves. There should be enough fat to see the State through whatever happens.
Booking a train ticket in Britain in recent months is like rolling a dice. This month alone, there are five more days of rail strikes and six days of bus strikes
Also on Wednesday, UK prime minister Rishi Sunak announced a five-point plan that was three parts economic shtick. He said it would bring “peace of mind” to British people. It doesn’t take an expert to figure out that they simply are not themselves right now.
The pandemic of strikes infecting the UK’s economy and public infrastructure is one of the most obvious manifestations of whatever is eating our neighbours. Booking a train ticket in Britain in recent months is like rolling a dice. This month alone, there are five more days of rail strikes, six days of bus strikes, and a further six days of stoppages among National Highways staff.
The B-word
The creaks emanating from Britain’s cherished National Health Service are beginning to make Ireland’s oft-maligned health system seem acceptable by comparison. There are two days of ambulance strikes planned in Britain this week, along with two further days of nurses’ strikes. There are other stoppages planned for January by driving examiners, civil servants in the Rural Payments Agency, which subsidises farmers, and also a strike among Scottish teachers.
The stoppages have not yet spread to the same degree in the private sector, where wage increases have absorbed some of the sting of inflation. Thank goodness, because the disruption being wrought on ordinary people’s lives from Britain’s public sector farrago must be hard enough to bear on its own. If Sunak has a plan to calm all the mither, he isn’t sharing it.
Of Britain’s economic frailties and embedded inflation, he said: “I think people do accept that many of these challenges are, at least in part, the legacy of Covid and impacted by the war in Ukraine.”
He forgot, of course, to mention the B-word. That’s Brexit, or maybe it is Boris. Or perhaps they’re somewhat the same thing. Either way, it must be clear to even the most defiant Brexiteers that the economic cost of exiting the world’s biggest supranational trading bloc for a series of half-cooked and disparate trade deals is a factor behind the UK’s economic ill effects.
It is estimated by the Organisation for Economic Co-operation and Development that Britain will put in one of the worst economic performances in the club this year. A recent poll of top economists by the Financial Times shows they believe it will have the deepest recession in the G7. The UK government’s own Office for Budget Responsibility says it will shed 500,000 jobs by 2024. Against this backdrop, it has announced an effective return to austerity. Think how painful this will be.
While Britain’s relative importance to the Irish economy as a trading partner has declined slightly in recent years, it is still of huge importance, accounting for 11 per cent of all our exports
Bank of England figures show foreign investors sold off UK government bonds at the fastest pace on record between September and November, a period during which Britain’s pensions sector flirted with disaster after the UK’s fiscal framework blew up. Yet over the next financial year, Britain will try to borrow £300 billion on international markets, its second highest amount ever.
Meanwhile, we are putting excess cash from our corporate tax windfall into a national piggy bank. We’ve got plenty of problems of our own, but there is still a clear fiscal and economic contrast with the UK’s predicament.
Yet this is no time for Irish smugness. The Republic’s exporters to Britain have adapted well to Brexit. While its relative importance to the Irish economy as a trading partner has declined slightly in recent years, it is still of huge importance, accounting for 11 per cent of all our exports. Ireland needs Britain somehow to find a way out of its funk. We should also want to see our neighbours do well.
[ UK faces worst and longest recession in G7, say economistsOpens in new window ]
Profound consequences
Through it all, Britain remains a resourceful nation and the scale of its challenges may yet spur it into effective action. Still, the winds swirling around it may bring profound consequences in coming years, regardless of how quickly it steadies itself.
This will be my final Caveat column, a slot that I have been privileged and grateful to fill. I am relocating to Britain, where I hope to chronicle for The Irish Times some of the impact of its issues on its politics, society, economy and also, most importantly, on its people.
Even if we feel we know our neighbours well, it’s no harm to try to know them a little better.
