Opportunities, dangers and trends in 2015

Yogi Berra famously quipped that ‘it’s tough to make predictions, especially about the future’, but here are four themes which could be important for Irish business in the coming 12 months.

The first is the relationship between the euro and sterling. It is quite clear that the dollar is going to make strong gains against the euro in the next few months.

Traditionally, the dollar and sterling have tended to move in tandem so this would suggest that Irish exports to the UK will become cheaper and more competitive. That would in turn help many companies here.

But over the past 12 months, the link between the US and UK currencies is weakening.The euro has fallen against the dollar by around 12pc but sterling has also fallen against the greenback by around half that amount. This means the pound is strengthening against the euro but not by as much as one might expect.

The really interesting question is what will happen in 2015. The British economy is unbalanced and feels far from secure. Between the economic problems, the general election this spring and the possibility of the UK leaving the European Union, it would be unwise to bet on sterling gaining much more against the euro despite all the wishful thinking from the other side of the Irish Sea.

A second theme for Irish business will be our own elections which must be held by early 2016 and could well be held later this year – before or after a giveaway Budget. The elections will highlight to people here, and business partners abroad, just how angry the electorate has become with the establishment. We have already seen falling consumer confidence over the Irish Water debacle; expect to see plenty more dips in confidence as the parties go into overdrive and people begin to contemplate a hung Dail or a Sinn Fein-led government.

Nobody correctly forecast the complete emasculation of Fianna Fail ahead of the last elections and the same forecasters may well be unable to understand what the opinion polls are already telling us; that all mainstream parties are now tainted by the financial crisis and their inability to reform themselves or the country as a whole. This political instability will make borrowing more difficult and deter consumption despite improvements in the economy.

One good thing that may come from the elections is tax reform. The pressure from Washington and Brussels to reform our taxation system will become relentless in 2015.

The probe into Apple’s tax affairs won’t affect many domestic companies but is likely to mark the beginning of a real discussion about taxation in this country that may lead to long-delayed reform of income and business taxes. The present system needs a fundamental overhaul to help domestic businesses, and lobby groups need to begin the conversation now to influence that debate.

Lucinda Creighton’s new party has already said it will campaign for fairer taxes for small business people. A campaign along those lines, together with an attack on transfer pricing from Brussels, could give Irish businesses the leverage they need for a once-in-a-generation reform of our tax system.

A final trend which will continue into 2015 is the sickening combination of labour shortages and high unemployment.

Businesses around the country will be competing endlessly with one another for experts in the usual sectors such as technology and pharmaceuticals but also unexpected sectors such as construction where skills shortages have already become a problem. This will inevitably push up wages in many sectors despite all the wailing in recent days from Ibec and ISME’s Mark Fielding.

There are plenty of reasons to be cautious as we begin 2015 but it is worth remembering that almost nobody predicted that the economy would enjoy the sort of recovery we have seen in the past 12 months despite everything that has been thrown at us at home and abroad.

The trend is your friend and the trend is getting better.

Article Source: http://tinyurl.com/kbwqb42