No matter what side of the political fence you stand on, Brexit negotiations and the uncertainty surrounding it will affect millions of households all across the United Kingdom, including Northern Ireland.
The Irish economy continues to grow; however, this could be threatened depending on the outcome of Brexit negotiations. The Central Bank has stated that the level of both public and household debt is a concern.
The Central Bank’s first Macro-Financial Review of 2018 indicates the domestic economy is “growing substantially’, however, this has a lot of potential risks associated with it. The organisation’s assessment considers all progress made to reduce both private and public debt and non-performing loans (NPLs) within the financial sector.
Ireland’s economy’s gross domestic product (GDP) is estimated to increase by 4.8% in 2018, and 4.2% in 2019. The review notes that “business sentiment has been improving over recent quarters and increased building and construction is contributing to investment growth”. The report also highlights that, while Brexit is “a key risk to the Irish economy, there’s also a concern that as the economy approaches full employment, upward pressure on wages and skills shortages, as well as infrastructure deficiencies, could threaten competitiveness”. Furthermore, changes affecting international corporate tax rates may hinder overseas investment as well as economic performance.
The Central Bank’s review also highlights the following Brexit-related risks that could potentially harm the Irish economy:
• Both domestic businesses and households are likely to delay any investment decisions until there is a clear trading relationship with the UK.
• UK and Irish economic growth could affect Irish bank loans due to Brexit related slowdowns.
• Irish banks could face potential challenges when looking to issue debt through the UK.
• UK insurance companies may potentially no longer be able to trade in Ireland, this will affect competitiveness and limit the number of available products.
Household and public debt levels
There are a number of other associated risks to the wider economy and financial system, in relation to household and public debt. These include the following:
• International financial market valuations of assets – some have been overestimated and are vulnerable to market sentiment change.
• Increased growth in residential property prices.
• Property related lending in relation to bank exposure.
• Large levels of public and household debt – household debt is the 4th largest amount within the EU.
• A small number of companies account for a large share of corporation tax – changes in the political landscape could leave the country exposed financially.
• Many international companies bring a large level of direct foreign investment to Ireland, changes in international tax agreements by the EU and the US would pose a threat.
The Macro-Financial Review highlights that the household sector has benefited from an improvement to labour market conditions and low interest rates. However, Irish households, like many other countries, remain highly indebted and could be affected by the following:
• Household income
• Significant changes to Interest rates
Total mortgage lending has become more stable after a long construction duration; however, the use of consumer credit is increasing. Those who are struggling with personal loans, pay day loans, credit cards, catalogues and overdrafts are recommend to contact Refresh Debt Service, the company provides expert impartial advice and guidance.
The report states that “A large number of households remain in late-stage arrears.” Rent and residential property prices are seeing strong growth, a shortage of available residential properties is just one contributing factor. Although construction activity has been increasing, the availability of new properties still remains far below housing demand levels. The number of mortgage accounts in arrears continues to decrease.
As changes take place in relation to Brexit and the overall health of the UK economy, we hope to keep you updated.