The UK’s decision to leave the EU in Summer 2016 sent shockwaves throughout Europe and left neighbouring countries struggling to interpret what ‘Brexit’ means for them. Ireland, as the UK’s closest neighbour both culturally and geographically, could stand to benefit from the decision in the medium- to long-term, especially in terms of its healthcare and life sciences sector.
Pharmaceuticals is indisputably a key pillar of the Irish economy. Nine of the world’s top ten biggest drugmakers are located in Ireland and half of all the nation’s goods exports, making up EUR 30 billion in 2015, come from pharma. With this strong foundation, the UK’s decision to leave the EU is actually creating opportunities for the sector to develop even further, not least in the potential relocation of the EU-wide drug regulatory body, the European Medicines Agency (EMA), from London to Dublin.
“In the Brexit aftermath, we are now the only English-speaking country in the European Union.”
Aidan Meagher, tax partner & Irish life sciences lead at Ernst & Young (EY), describes the possibility of the EMA moving to Dublin as “an incredible opportunity for Ireland,” which would cement the country as a life sciences hub and also offer the comparatively small nation more bargaining power in an EU without the UK. Beating off competition from the likes of Rome, Paris, Lyon, Strasbourg, Lille, and Copenhagen will not be easy, but health minister Simon Harris highlights the probable seamlessness of a transition to Dublin as an important asset in Ireland’s bid; stating that “proximity to London is key” and offers the “best chance” of minimizing staff turnover.
Another positive for Ireland is the fact that, as Donal O’Callaghan, managing director of Callaghan Engineering points out, “In the Brexit aftermath, we are now the only English-speaking country in the European Union.” This stands as an advantage in terms of fostering deeper relationships with the US and for Ireland to develop its role as a culturally, linguistically and economically straightforward gateway to Europe for US firms. Mark Barrett, CEO of pharma process research specialist APC, develops the point, highlighting the fact that “location-wise, we’re lucky enough to be in a position where we can speak to the west coast of the US and Australia in the same day.”
However, it would be foolish to assume that an upsetting of the international political apple cart of Brexit’s scale will not be without any negative effects on Ireland and Irish firms, especially given how closely the economies of the two countries are linked. If Brexit causes a slowdown in UK growth, then Ireland’s economy will almost inevitably also suffer.
As Sam Bowman of the Adam Smith Institute points out, “when the UK catches a cold, Ireland sneezes – a one percentage point drop in UK growth seems to cause a 0.3 percentage point drop in Irish growth.” Furthermore, a Northern Ireland out of the EU which shares a land border with a Republic that remains within the union risks destabilising the peace agreement and having a knock-on effect on both countries’ economies.
The ambiguity of the terms of Brexit and what effects it will have on the UK and the region as a whole are a serious source of concern for many pharma companies in Ireland. Sorcha McKenna, partner at McKinsey & Company Ireland, highlights the dangers of uncertainty for her clients; “Brexit is really worrying people across the board, and so for many of our consumer clients and pharmaceutical clients, the question about what it will mean is actually a very big deal.
They are thinking about how to protect themselves in the event of both a potential global slowdown, but also a big slowdown in public spending, particularly across Europe as people adjust to the risks and challenges around free labor movement and free product movement.”
The full after-effects of Brexit on Irish pharma will remain unclear until the details of the UK’s deal with the EU are revealed and Brexit actually takes place. To mitigate Brexit’s potentially negative ramifications, EY’s Meagher highlights human resources attraction as of critical importance to developing the sector in Ireland: “What we need to do, as our next logical evolution of the sector in Ireland, is to attract more senior people from a regulatory and clinical perspective. To have that expertise at our door would be a huge force of attraction.”
However, regardless of the political winds across the Irish Sea, Ireland remains, in the words of Minister for Foreign Affairs & Trade Charles Flanagan TD, “committed to the EU. Our influence on the world stage is amplified and strengthened by our EU membership.”
Dave Murphy, CEO of engineering, architecture and project management firm PM Group, is relaxed about Brexit’s impact on his business, declaring that “we are in fairly niche sectors like pharma, medtech and food, which means we do not foresee much change in terms of business as long as capital investment continues.”
Irish pharma then, seems resilient to the potential banana skins of Brexit and can even hope to improve on its already stellar standing as a healthcare and life sciences hub through stronger links with the US, becoming the UK’s link to the EU, and the possible relocation of the EMA to Dublin.
Writer: Patrick Burton