On as ‘Brexit’ will definitely impact the union’s member
On 23 June 2016, a country with 65 million population held a referendum that will change the nation’s future. Facing the question of “should the United Kingdom remain a member of the European Union or leave the European Union?”, fifty-two percent of the voters voted to leave as opposed to 48 percent voted to stay in the European Union(EU). This is a contrast when compared to June 1975, when 67 percent of voters decided to stay in the EU. It is also the first country voted to leave the EU within 60 years (Jeffery, 2017). An official letter that was sent to the European Council President, Donald Tusk 29 March 2017, which invokes the Article 50 and triggered the two years leaving process. EU is an economic union, which means UK’s decision to leave EU, also known as ‘Brexit’ will definitely impact the union’s member states. Also, provide that there is also a unique relationship between the UK and Ireland (The Guardian, 2018), this raised more concern for companies in Ireland who are having a business relationship with the UK. If business gets affected, the economy will certainly be affected, which the Irish construction industry is one of them.Background of the European Union and its relationship with the United Kingdom and IrelandIreland and UK started to become part of the EU’s history since 1973 before the EU change its name from the European Economic Community to ‘European Union’ in 1993. The EU was originally an economic union, which its aim is to develop the economic cooperation between countries. The member states share a single market and the same currencies (except UK). The goods can circulate within the member states without extra custom duties or other trade barriers, investment and movement of capital will be treated as domestic transactions without extra fees, freedom of providing services in another member state country, people can also move, work and live in any EU country (En.wikipedia.org, 2018) (Growth, 2018). It is to be noted that, UK and Ireland are not part of the Schengen Area, which within the area, passport controls have been abolished.There are over 500 million people in the EU, which 4.63 million people in Ireland and 64.88m million people in the UK, each accounting 0.91 percent and 12.61 percent of the total population of EU.(European Union, 2018). This means that although Ireland has only a population of roughly 4 million, it has access to a market with 500 million people. Other than that, Ireland also received benefits such as EU funding, increased in employment and foreign direct investment. (Ireland – European Commission, 2018).Background of Irish Construction IndustryConstruction as an industry comprises 10 percent in Ireland’s GDP and GNP in 2007 according to the Central Statistics Office (2008). After the property bubble which occurs between 2004 – 2008, the construction industry’s output hit record low of -38.30 percent in the second quarter of 2009. (Tradingeconomics.com, 2018). From 2014, Ireland’s economy entered the recovery state, with a Gross Domestic Product (GDP) growth of 4.8 percent. In 2016, the construction industry in Ireland employs 137,000 people which equates 6 percent of the total labour force as well as the country’s total output at the time. A report was done by the Construction Industry Federation (CIF) in 2017 forecasted 8 percent average annual growth for the construction industry, which the output will rise from €15 billion in 2016 to €20 billion by 2020 (Parlon, 2018). Impact of Brexit on Irish Construction IndustrySimilar to other sectors and industries within the national economy, the construction industry has supply and demands which creates markets, thus create employment. Economic activities that happen within the economy keep the industry moving by having a positive circular flow of income within the industry. The following paragraphs will look at the impacts of Brexit to the Irish construction industry.Similar to other sectors and industries, Irish construction industry gets affected by Brexit as well. The following paragraphs will look at the impacts of Brexit to the Irish construction industry.Movement of People/ LabourBrexit imposes restrictions on the free movement of people between UK and Ireland. This is an important issue to the Irish people working over the border at Nothern Ireland or in the UK and also the other way round. This means that they need to go through the process of obtaining visas and working permits, which increases the timeframe and prolonged the access to the labour market. The recent agreement clarified that EU citizens in the UK and UK citizens in the rest of the EU also have the right to stay. (The Irish Times. (2017) and gain the ‘settled status'(The Sun, 2017). The recent Brexit deal on December 8, 2017, clarified that there will be no hard border between Northern Ireland and the Republic of Ireland. (The Irish Times, 2017) Movement of Goods/ Trades UK is the second largest trading partner of Ireland, which Ireland exports 28 percent of its goods and services worth $17.7B to the UK in 2016, of which $733m is construction related raw materials. For example, Ireland exported 91 percent of its wood carpentry which worth $26.8m for construction in 2016(The Atlas of Economic Complexity, 2018). After Brexit, Ireland may need to pay higher tariffs while importing and exporting goods to the UK, which will increase the cost of goods and services and contribute to the tender price inflation.(Walker, 2018).Additional upfront cost can also put companies under pressure. The fluctuations of the currency due to uncertainty around Brexit (Whelan, 2018) can impact the industry as well. When the euros are stronger than pounds, it is found that companies were taking advantages of it to stock up construction materials. (FEXCO, 2017). On the other hand, contractors are struggling to price for a long-term project due to uncertainty (Enterprise-ireland.com, 2018). They need to start mitigating the risk while finding tactics to win jobs.