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Brexit knocks growth in Irish services to 2 1/2-year low

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Growth in Ireland's services slowed to its weakest in almost two-and-a-half years in July after Britain's vote to leave the European Union, a survey showed on Thursday.

[DUBLIN] Growth in Ireland's services slowed to its weakest in almost two-and-a-half years in July after Britain's vote to leave the European Union, a survey showed on Thursday.

Ireland's is widely considered the European Union economy to have the most to lose from Brexit. In July, a survey of Irish manufacturers fell to its lowest level in more than three years in July.

The Investec Purchasing Managers' Index (PMI) of activity in services fell to in 59.5 in July, from 61.2 in June. The index, which covers businesses from banks to hotels, has been above the 50 mark denoting growth for four years as Ireland recovers from its 2008 real estate and banking crash.

The sharpest falls were registered in the sub-indexes for input prices, outstanding business and employment, which fell to 54.9 from 57.2 for its slowest growth since May 2013.

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New business also declined, but twice as many panelists reported a rise in new business during July as those that recorded a fall.

There were also "surprise" increases elsewhere, said Philip O'Sullivan, chief economist at Investec Ireland, with new export business improving because of an apparent boost from continental Europe and Asia.

Business expectations also improved slightly from the 34-month low seen in June's survey, when most of the responses were received before the results of the British referendum.

Ireland's economy is forecast to grow faster than any other in Europe for the third straight year in 2016 at 4.9 per cent.

But the government has cut its forecast for 2017 to around 3.4 per cent from 3.9 per cent and warned of worse ahead if Britain strikes an unfavourable post-Brexit deal with the EU.

"Continued growth in the wider economy and improved client demand were key factors behind the latest rise in activity, with some panelists highlighting orders from foreign clients," the survey's authors said in a statement. "On the other hand, a number of respondents indicated a dip in client sentiment following the UK's decision to leave the EU."

REUTERS

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