The themes of ‘change’ and ‘the future’ were very much to the fore as Labour made its way back to power in the aftermath of the UK general election.
Here, the language focused on a ‘reset’ of relations after years of what could be fairly described as strained associations between the UK and Ireland.
While the language has remained diplomatically polite around the outcome of the vote, in reality, metaphorical – and perhaps actual – champagne corks were popping in business and political circles on Thursday night as a future defined by more cordial UK-Ireland relations beckoned.
The Starmer effect
Historically, the relationship between the islands has generally been better with a Labour government in power in the UK.
There’s no denying, though, that Kier Starmer has a closer bond than most Prime Ministers have had with Ireland.
Having holidayed here shortly after the got married, he apparently wears a Donegal jersey when he plays seven-aside football with friends in London. What’s more, his backroom team has a number of individuals with strong connections to Ireland, including Labour campaign director, Morgan McSweeney who is from Cork.
His elevation has been welcomed in unequivocal terms here.
“In Kier Starmer, we’ll have a willing partner,” Taoiseach Simon Harris told Claire Byrne on Friday.
“We need to move on from the political dramatics around Brexit and back to a more mature, functioning relationship between friends and neighbours,” he said.
‘Reset’
So what will the reset look like?
At a fundamental level, it should herald an end to those ‘dramatics’ that defined the Brexit era.
The Conservative administration is being replaced by a team in Downing Street that better understands Ireland, north and south, and the complexities and intricacies of the shared island.
Shortly after the election was called, Starmer told the Irish Times that he was determined to restore “respectful engagement” with the Irish government over Northern Ireland.
“There’s no need for anything new. All that is needed is regular meetings,” former Taoiseach Bertie Ahern said.
He pointed out that the relationship had frayed since the Brexit vote in 2016 as contacts as informal and basic as meetings on the margins of EU summits came to a sudden halt.
There is an opportunity now to re-establish that relationship, he added.
Even on the Brexit front, instead of seeking to bring the UK back into Europe, Starmer appears intent on forging a closer relationship with Europe and, by extension, Ireland.
Trade dividend
On the trade front, if Labour hatches a bespoke agreement with the EU over veterinary checks, it would reduce the need for customs checks on foods entering Northern Ireland from Britain, and by extension, the need for ‘border’ in the Irish sea.
This, of course, was the issue that precipitated a two-year hiatus in power sharing in the North.
John McGrane, Director General of the British Irish Chamber of Commerce, told Morning Ireland that such an agreement would benefit economies on either side of the Irish Sea.
At a basic level, it would simply see British people eating more Irish food, he said.
“Irish food is the best in the world, and when Britain is enabled to eat more of it rather than less of it, which is what happened during Brexit, everyone wins,” he said.
From a trading point of view, he believed there would be a return to stability, which he said would be hugely welcomed.
“What business wants is to understand where the ball is going to land and now we know. The relationship between Britain and Ireland on the trade side is the most important that we have,” he explained.
Indeed, the numbers bear that out.
Two-way bilateral trade in goods and services between Ireland and the UK was worth over €122 billion in 2022.
That amounts to about €2.4 billion every week.
Over one third of Irish exports go to the UK and it remains the largest single destination for Irish food, drink and horticulture exports.
Closer ties with Europe
Brexit was very much the taboo subject for the duration of the election campaign.
Labour was treading a tightrope in its attempts to woo back Brexit supporters while not alienating working class voters in particular.
But Starmer was forthright in his intentions to seek a better relationship and closer ties with the European Union.
For example, he will seek agreement allowing an easing of restrictions on financial workers in the City of London doing business across the EU.
He also desires the negotiation of a security pact with EU countries to clamp down on groups that ferry migrants across the English channel and the abandonment of the Rwanda policy on deporting migrants.
However, it may not be all plain sailing in negotiations with Brussels as Starmer is adamant that the UK will not re-enter the Single Market or the Customs Unions or allow the free movement of workers.
That is likely to be a red line for the EU in any negotiation on closer relations, including any loosening of market access.
The economic picture
Luck has an important part to play in any leader’s ascension and economically Kier Starmer has quite a healthy dose of it is on his side.
Inflation is now back down to the 2% target, retreating from the four decade high reached in 2022.
And UK growth is back on track again after last year’s short, shallow recession.
“There could also be a further boost to economic confidence next month for Labour if the Bank of England finally decides to start cutting interest rates, potentially paving the way for a notable reduction in mortgage costs over the next year,” Victoria Scholar, Head of Investment with Interactive Investor pointed out.
On the market side, the reaction to the victory was rather muted, suggesting that it had already been largely priced in by traders.
Starmer had been very careful not to ‘frighten the horses’ with any radical plans. Instead, he positioned Labour as a pro-business party and held back from announcing plans for any tax increases.
Memories are fresh about the effect that Liz Truss’s attempts to dramatically reframe the British economy had on bond markets and the pound less than two years ago.
“The lack of market volatility and subdued price action suggests investors and traders see the latest election outcome as a democratic vote in favour of a new political era representing stability and calm,” Victoria Scholar said.
“A Labour government could pave the way for an outperformance of more domestically focused mid-cap stocks if Keir Starmer’s party works to ensure fiscal stability and helps to lift confidence in the UK economy,” she added.
Declining wealth
However, that return to confidence is not a foregone conclusion.
Living standards in the UK have stagnated in recent years, public services have deteriorated significantly, but taxation has risen to historic highs.
A study published by Cambridge Economics earlier this year calculated the cost to the UK economy of Brexit at about £140 billion.
The average Briton was nearly £2,000 worse off in 2023, the report concluded.
Some argue that nothing short of a radical overhaul of the economy by Labour will turn that situation around.
Kier Starmer and his government will be given the opportunity to do just that but voters will be expecting the change that he has been promising.
And that change will be measured in pounds and pence in their pockets.
