Talking business with John McGowan: Brexit? What next? Hard, soft or special status?

Brexit will continue to dominate the press and media over the next two to three years.

Every newspaper and news channel will follow the negotiations and we've already seen some nonsense about Gibraltar being published by the British press.

Expect more of this nonsense as the negotiations get under way and god knows what they will write if the British don't get everything their own way.

This is going to be a long few years if you’re already bored with the coverage.

As everyone knows, when the vote to Leave won the referendum, I likened dragging NI out of the EU to an act of economic suicide.

The fact that the DUP Economy Minister Simon Hamilton campaigned for it (against the view of the vast majority of the business community) was particularly worrying.

How could the Minister act against the majority of the businesses he is meant to be representing?

Can you imagine the Health Minister campaigning for the smoking ban in public places to be lifted?

Even more, what if he campaigned that cigarettes were good for you?

My point is that he has lost all credibility with me and with many of the business community.

His economic espionage has destroyed any chance NI has of attracting FDI for at least three years.

Even worse, if we lose tariff free access to the single market, it will make the job of attracting FDI to NI almost impossible.

The managers in the 12 overseas offices they fund from Dublin to Shanghai must have thought "Why is our Minister completely ripping up the best part of our sales pitch?".

Free access to the EU single market is a big part of the argument to set up in NI.

As one top exporter said to me "When Simon Hamilton, the Economy Minister backed the Brexit Campaign I visualised it as him "face punching himself ".

There was absolutely no economic argument to be made for it. In my opinion he should have resigned. Even his old bosses in PWC are warning of the impact that Brexit will have on NI. But of course, Simon knows better.

So what could happen?

What is a Hard and a Soft Brexit?

More importantly will it affect us?

And will Scotland leaving affect NI?

What would Special EU Status do?

These and many questions are being debated across all media in Ireland and further afield. So many different scenarios have been written about from journalists all over the world.

I have been contacted by friends all over Europe telling me that they have read that a fence is going up between the North and South of Ireland. One Italian actually congratulated me on the strong possibility that the British were finally reunifying the country. The truth is that no one knows.

A Hard Brexit as it is called is best described as a breakdown in the negotiations early on.

This may be as a result of the UK refusing to pay the fees being sought by Brussels or a refusal by them to cede anything in terms of free movement of people. Both sides will probably sulk and "throw the toys out of the pram".

For the North, this will be the worst scenario.

It could result in a border being established and the return to customs posts etc. In the worst of cases, patients from Donegal couldn't get treatment in the North and people applying to work in Derry from Donegal might need a work permit.

As unlikely as this is, a Hard Brexit would mean non UK residents would need a work permit so someone from Buncrana would be viewed in the same way as someone from Bucharest.

A Soft Brexit would occur when both sides equally concede on the issues which concern each other.

This would mean smooth negotiations and the possibility of some concessions on tariff free access to the Single Market etc.

This "Norway” type model would mean the British paying for market access and in return offering some concessions on the movement of people.

Judging by the nonsense being spewed daily into the media by Brexiteers it seems highly unlikely.

Many in the Tory Party seem hellbent on attacking the EU at every opportunity. You would nearly think they were attempting to whip up public opinion against the EU and weaken the negotiation hand of Theresa May.

Many point to an economy which is growing and exporting more as a reason to say the U.K. is better out of the EU.

The picture however is masked by a few factors. For one the pound has tumbled from a high 16 months ago of 1.39 to around 1.15. This, of course, has made exports considerably cheaper and this has boosted the economy.

As an economist said recently in the Times "If you can increase exports when your currency crashes then your products are really bad".

The other boost to the economy is the service sector growth which has been fuelled by low interest rates and the availability of cheap credit and loans.

Last week a number of reports raised concerns about the credit bubble which was beginning to near 2007 levels before the crash.

If you think about it, the UK economy is 80% service sector so it's easy to see why, with cheap loans, people are spending.

It does however mask the fact that this is a false boost.

Eventually banks will rain in this credit and the Bank Of England will increase rates.

This could crash this service boom very quickly.

Bear in mind inflation is beginning to rise so people may begin to cut back.

Regarding the currency, it's clear the government has allowed it to fall. Some say to boost exports and give the economy a feel good factor.

Eventually however the currency will go up or in fact may go down again temporarily depending on negotiations.

Many believe the fall was allowed to happen so that any tariff wouldn't make the UK product uncompetitive.

Whatever the reason, manipulating a currency is illegal and normally something a banana republic does to regain competitiveness.

Are we to assume the mighty pound will be allowed to sit at this rate much longer?

The overall effect of a low currency makes imports much more expensive and the U.K. imports much more than it exports.

In the short term it may stay low but if the markets decide to buy Sterling, it will rise and exporters will find margins slashed again.

Any tariffs or Non Trade Tariffs will drive costs and exporters may begin to feel the pinch.

For those who talk about attracting new markets across the world like "Blightey" used to do 200 years ago please go and read a trade book.

The rule is when you double the distance you half the trade. The world has changed but the British really haven't.

So what about Special EU Status for the North?

This seems the best option for us. No one is actually defining how it would work but there seems to be a willingness from both the Irish Government in Dublin and the Brussels negotiating team to push for it.

The North will lose £600m of EU funding a year across education, training, farming and structural funds. It's highly unlikely the U.K. exchequer will write us a cheque.

We will be told to join the very long queue.

With talk of the development of a Northern Powerhouse in Manchester to rival London, Tories will drop money where they really want to get votes.

This is politics and not economics.

A Conservative government will care little for some DUP votes when it gets an enhanced majority at the next election.

So what would it mean if we did get Special EU Status?

We first of all have to fight for it and many of the political parties do support this.

The DUP seem to be opposed but hopefully this will change. In a perfect world it would allow us access to the EU market, hopefully tariff free.

It might also mean access to EU funds through possibly Dublin or even Intertrade Ireland. It would also mean free movement of people on the island of Ireland.

We would still be part of the UK but would be a member of the EU (maybe an associate member).

Again the detail is scant but it would be fantastic for business and investment.

We could find ourselves moving from an Investment Pariah to an Investment Hotspot.

Again everyone would keep their identity and whatever passport they wanted. We would still be part of the UK but we would really come quickly on the Investment radar.

Those Invest NI overseas offices would quickly stop face punching themselves to take the many calls regarding how can a company locate here. Pushing for Special EU Status gives us the best of both worlds and is definitely my preferred option.

So there u have it. Every one of us who wants our kids to have a brighter future and access to a good job should do what they can to push for Special EU Status.

For the North, it could be that catalyst our economy has always needed.

As I said two weeks ago, we've had enough of politics.

Can we please now have some economics?

If someone can tell me why having the best of two worlds is wrong economically then I'll listen.

If they can explain how in a Hard Brexit scenario we have any chance of getting Investment ahead of Swansea, Manchester, Nottingham, Edinburgh, Liverpool or Birmingham I'll listen.

Competing with the UK for resources will be a cat fight for money and our claws are not sharp enough.

I'd prefer to be the only part of the UK with EU market access and free movement of people.

Ask any FDI expert.

The North would suddenly be the place to be.