Prime Minister Theresa May’s triggering of Article 50 of the EU Treaty, formally paving the way for the UK to leave the EU, signals the start of serious negotiations. The outcome of these is unknown.
Despite the understandable concern on Irish shores about the UK’s decision to leave the EU, our nearest neighbour will remain a natural first market for Irish exporters. Enterprise Ireland’s manager for the UK and Northern Europe, Marina Donohoe outlines the opportunities.
The UK economy will still be the fifth largest in the world by nominal GDP, with a population of around 65 million— some 14 times the size of Ireland’s. It will still be our closest trading partner by geography— sharing a language and a similar business culture— and it will still have that openness to goods and services from Ireland borne of our strong cultural relationship.
While strategies to offset whatever consequences arise from the UK vote are advisable, businesses in Ireland would be missing a trick if they discounted the UK market.
In fact, Enterprise Ireland has identified seven key opportunities for Irish companies based on UK government initiatives and evidence of sectoral growth:
- The National Infrastructure Delivery Plan
- The Northern Powerhouse Agenda
- Scottish Government Investment Plan
- National Health Service’s ‘Five Year Forward View’
- Water market
- Financial services/Fintech
National Infrastructure Delivery Plan (NIDP)
The NIDP envisages £503 billion of investment in 339 infrastructure projects across all sectors in the UK to 2021 and beyond. Irish companies are operating in these sectors already and there are huge opportunities such as:
The Northern Powerhouse is an initiative to address a constellation of issues surrounding economic growth and productivity in the North of England.
The UK government intends to spend £134 billion up until 2021, 32% of which will be spent in Northern England. The goal is to rebalance the country’s economy and establish the North as a global powerhouse.
Cities include Liverpool, Leeds, Sheffield, Newcastle and Hull, as well as regions such as Cumbria, Lancashire, Cheshire, North Yorkshire and the Tees Valley.
The opportunity for Ireland lies in supporting initiatives in road, rail, freight, aerospace and skills development. Key deliverables include improving freight capacity, and road and rail infrastructure. For example, the HS2 high speed train network alone will cost £55.7 billion.
Scottish Government Investment Plan
Enterprise Ireland continues to have a strong geographical focus within the Scottish market. Holyrood has highlighted the strategic, large-scale investments it intends to take forward across a number of key sectors over the next 10 to 20 years. Key areas of investment which will provide opportunity for Enterprise Ireland clients include energy, water and housing.
For instance, the Housing Supply Budget was set at £690 million for 2016–17, delivering up to 9,000 affordable homes— up 28% on the average output of the previous two years.
National Health Service (NHS)
Despite the political and economic uncertainty of 2016, the healthcare sector has remained strong over the last 12 months. An ageing population, improved diagnosis and an ever-changing world of assistive and diagnostic technologies have all ensured the sector’s appeal to client companies.
The NHS is rife with opportunities as the funding gap is set to widen to £30 billion by 2021. The NHS needs to deliver £22 billion in efficiency savings to try and offset this figure, with a lot of this being driven by a focus on digitising as much of the landscape as possible and being paper free by 2020.
On the private healthcare side, competition is set to increase in London as Cleveland Clinic is set to enter the market with their first facility slated to open in 2020. However, although the private healthcare market is growing (currently around £4.5 billion) it pales in comparison to the £107 billion NHS budget.
Water market opportunity
UK water utilities are planning a total expenditure of £41 billion between April 2015 and March 2020. Enterprise Ireland is working with UK and global buyers who have access to this opportunity and could also prove to be a stepping stone to international projects.
With over 250 foreign banks; expertise across retail banking; insurance; capital markets; bonds; equities; currency; payments; regulation; and sector-specific advisory, legal and professional services, the breadth of the UK financial services sector is huge. The sector employs 2.2 million people in the UK. It is a truly global centre of expertise and one that will continue to offer opportunity for Irish fintech companies after the UK exits the EU.
Opportunities will emerge as the negotiations get under way, particularly for legal, advisory, professional services and IT solutions providers, as UK firms may seek new structures around regulation, compliance, currency handling, money laundering and data handling.
This is a sector Enterprise Ireland has been working in for many years and, as new opportunities unfold, we are well placed with high level contacts to introduce our clients to key decision makers.
UK Aerospace industry captures 17% of the global market and is considered the largest player in Europe and second globally after the US. Turnover in 2015 rose by £1.9 billion to £31.1 billion. Aerospace is vastly outperforming the wider UK economy with productivity up 30% over the past five years, compared with the national average of 2%. Through the Aerospace Growth Partnership (AGP), industry and government are working together to ensure the UK is well placed for future growth opportunities. Investment in skills, technology and the competitiveness of the UK supply base is supporting this.
Internet of Things (IoT)
Enterprise Ireland is reacting to opportunities emerging outside of these seven key sectors too. In particular, we are responding to the growth of IoT technologies. The UK has some of the best equipment (mobiles, tablets, computers) usage rate projections in the world. It will account for an estimated 30 connected devices per household by 2020.
The size of the IoT market in the next three years is predicted to grow to £17.5 billion in the UK, with annual growth forecasts of up to 20% per year. The main growth areas are artificial intelligence, big data, smart cities, connected homes, transportation, health, manufacturing and smart grid for electricity.
IoT is clearly a massive growth market and as a result a source of business opportunities for Irish companies.