From a personal perspective 2016 was a busy and exciting year! New job, new country, new home and new friends! 2016 was an equally eventful year across the world and the annual year end media reviews have made for interesting reading over the holiday season. One thing is certain – the ripple of events in 2016 will make for another interesting year on the world stage!
I speak to companies on a daily basis who are looking at the global market place, focusing on internationalising their business for the first time or maintaining and expanding their existing global operations. Ireland has a lot to offer companies from our educated workforce, pro-business approach, competitive tax regime and a strong history of multinational investment. While it is clear that Ireland continues to be the location of choice for companies who are operating globally, the developments on a global scale in 2016 will impact all multinational companies. Here are some of my predictions of the main challenges companies will face in 2017 when operating globally:
- “Hard” Brexit woes for investors! For those companies who already have operations in the UK or who are interested in the UK domestic market, the Brexit vote undoubtedly has significant implications. The collapse in value of Sterling in the wake of the Brexit vote has made international products and services expensive to the domestic UK market. Uncertainty as to what Brexit actually means and how it will be achieved has impacted investment decisions relating to the UK market. Indeed given the weak sterling, one might have expected to see an increase in M&A activity with the global investment market capitalising on the valuable opportunity – the uncertainty around Brexit has meant that this is not the case.
- Recent indications from Teresa May is that the UK will pursue a “hard Brexit” approach – out means out! However, how this will be implemented and how it will impact trade remains unknown. Companies I speak to who operate in the UK had adopted a wait and see approach through to the end of 2016. As a hard Brexit now appears likely, companies are talking to us about considering a parallel Irish structure to complement their existing UK structure which will allow them flexibility in the wake of Brexit to access the free market across the EU.
- The Trump Show – Season Premiere: Since President Trump entered the White House over 2 weeks ago, he has not wasted any time in moving forward on his election promises regarding his first 100 days of presidency. On tax, trade and immigration, the Trump campaign was far reaching in terms of its claims for reform. From a tax perspective, it is clear that US corporate tax reform is more likely than ever and there is a focus on economic nationalism and protectionism that has not been seen before. While this rhetoric could be considered outdated in the modern day globalised economy, it is clear that Trump is appealing to the populous who feel that US jobs are being threatened. However the fact remains that companies will continue to operate internationally and seek to access global markets. Our clients with operations in Ireland continue to express their commitment to Ireland as a business location, and we continue to talk to companies who are looking at the European or global market and need a local base to operate from. From an Irish perspective, Trump’s effectiveness in office will be watched with much interest and Ireland must continue to maintain our reputation as a best in class investment location for those US companies who continue to focus on a worldwide market.
- A focus on tax from the EU: The pace of change in the international tax landscape continued in 2016 and both BEPS and the EU Anti-Tax Avoidance Directive made significant progress throughout the year. 2017 will see a lot of companies continue to consider and move to implement BEPS/EU compliant tax structures. We are talking to a lot of companies about restructuring some of their EU or global operations through Ireland in order to have a sustainable, defendable and compliant tax structure going forward.
In losing a common ally in Britain in EU negotiations, it will be vital for Ireland to align with other similarly minded countries in pushing a “small country agenda” at an EU level and ensure our interests as a small open economy are protected. Ireland continues its commitment in the area of tax reform to offer a best in class but compliant and transparent regime.
From a personal and professional perspective, the ripple effect from the events of 2016 will certainly shape the year ahead! With so much change a foot, please feel free to reach out to us to discuss how your business will be impacted.