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Wednesday's Business and Politics round-up

06 Dec 2017

Commuters reading daily news on their journey to work

Good morning!

Was there ever a more puzzling conundrum than post-Brexit arrangements for the Irish border?

All sides agree they don't want a return to the hard border, and this is set out under the provisions of the Good Friday Agreement. But this agreement was always underpinned by common frameworks: the EU's Customs Union and Single Market.  

It's increasingly clear that regulation lies at the heart of the Brexit debate – we’re talking about trade negotiations, after all. All the more reason, then, for the Article 50 talks to move on to phase two issues - trade and the future – sooner rather than later. 

This reveals what the IoD has been saying all along: how is it possible to talk about certain aspects of phase one - such as the Irish border - without talking about future trading arrangements?

Overnight, there was no sign of things getting easier for the Prime Minister, as it emerged the MI5 foiled a plot to plant explosives at Number 10. There is also the small matter of her reportedly facing a Cabinet revolt led by leading Brexit supporters, Boris Johnson and Michael Gove, who accuse her of pushing for a soft Brexit.

Cabinet sources say May didn’t even try to seek ministers’ agreement on the proposal for “regulatory alignment”, and she made a “fleeting” reference to it in Tuesday’s Cabinet meeting.

But what’s done is done, and sometimes time is too short to dwell on the past. For now, UK business leaders are looking ahead to next week’s European Council summit in Brussels, which may or may not inaugurate phase two.

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You, me and DUP

The fallout from Monday’s tumultuous events continue, with DUP leader Arlene Foster saying the draft deal that the UK was set to agree with the EU on Monday came as “a big shock” to her party.

Speaking to Irish national broadcaster RTÉ, Foster said the DUP only saw the text of the agreement on Monday morning, and “once we saw the text, we knew it was not going to be acceptable”.

The key point of contention was how closely Northern Ireland regulations should stay aligned with Ireland, with a view to avoid a hard border. The DUP does not want Northern Ireland to be treated differently to the rest of the UK.

The DUP rejected a clause in the draft agreement with the EU that would guarantee “regulatory alignment” on the island. Irish Prime Minister Leo Varadkar had insisted on the clause in order to avoid a return to the hard border.

In the House of Commons yesterday, Brexit Secretary David Davis defended the proposal by asserting any such alignment would be UK-wide. “We will not be treating one part of the United Kingdom differently from any other part”, he said.

It seems all eyes are on London now. Yesterday, Varadkar said “the ball is now in London’s court”. Meanwhile, Irish Foreign Minister Simon Coveney said the Irish Government wishes to give May time and space to manage “difficult political issues”.

But DUP Deputy Leader Nigel Dodds has blamed Ireland for the break up of the talks and behaving in a “reckless and dangerous way”.

The saga continues and there is likely more drama to come as May seeks to reassure leaders on both sides of the channel.

Are you being served? 

Firms operating in the UK’s services sector upped prices at the fastest pace for almost a decade last month, as they faced rising costs for food, fuel and salaries, according to a survey.

The Markit/CIPS purchasing managers’ index (PMI) for services reported a “sharp and accelerated rise in prices” by firms. The devaluation of the sterling has hiked up the prices of imported goods.

Additionally, the sector has been affected by changes to business rates and higher salaries following the launch of the National Living Wage.

The CIPS said "Businesses could no longer fight against the tide of higher prices for food, fuel and salaries as input cost inflation remained close to its strongest for six years, and businesses passed these increases on to consumers at the fastest rate since February 2008”.

The services sector accounts for around 80% of the UK’s economic output.

Figures paint a better picture for the manufacturing sector, however. A recent PMI survey showed manufacturing is growing at its fastest pace for four years.

Forbidden fruit

Ireland will comply with a European Commission order to collect a disputed €13 billion tax bill from US tech giant Apple.

Last year, the Commission ruled that Ireland had provided the company with illegal state aid by allowing it to pay an effective 1% corporation tax.  The case was referred to the European Court of Justice after Ireland failed to implement an order to collect the tax.

In response, the Irish Government says it opposes the Commission’s analysis of the case. It has lodged an application for the decision to be annulled.

Similarly, Apple is challenging the ruling. Chief Executive Tim Cook deemed the decision “maddening”.

Another spokesperson for Apple said "The Commission's case against Ireland has never been about how much Apple pays in taxes, it's about which government gets the money”.

Ireland’s reluctance to collect taxes from Apple is partly due to its desire to maintain its reputation as an attractive investment destination. Its 12.5% corporate tax rate is amongst the lowest in Europe.

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