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In Brexit, Could Ireland Wear the Crown?

February 21, 2019, 11:30 AM UTC

It was supposed to be a good year for Taoiseach Leo Varadkar. In January, for the first time since 2007, the Irish government—which was so savaged by the global financial crisis of 2008 that it was under the International Monetary Fund’s thumb until 2013—announced a budget surplus. Drastic survival tactics had paid off, including cutting public-sector salaries by as much as 20% and freezing all public-sector hiring and promotions. It had been uncomfortable. The collapse of the Celtic Tiger bubble—with its bankruptcies, layoffs, and foreclosures—was anything but a distant memory. But Ireland was back in the black. Imagine the indignity, then, for its top minister to step up to a lectern and tell the press four grim words: “Nobody will go hungry.” A panic over food shortages had gripped the country ahead of Varadkar’s budget announcement, sparked by the specter of a so-called “hard Brexit” by its top trade partner, the United Kingdom. (About half of Ireland’s food and live-animal imports come from the U.K.) The Irish government published a contingency action plan warning of “severe macroeconomic, trade, and sectoral impacts.” A flurry of tense news headlines followed.

Such is the paradox of Ireland in 2019. It has the fastest-growing economy in the European Union for the fourth-straight year with a gross domestic product that shot up from $226 billion in 2012 to $334 billion in 2017, a total that surpasses the GDP of Denmark and is roughly double the per capita count of France or Spain. Yet an uneasiness has permeated since 2015. That was the year the Irish GDP ballooned by 26%, inflated in part by a reclassification that included “inversions,” in which U.S. companies move their headquarters overseas in pursuit of lower corporate taxes. Ireland, it seemed, was Schrödinger’s economy: both flourishing and feigning. Nobody dares lift the lid to find out if the gains are rooted in reality or financial sleight of hand.

Then came Brexit. In 2016, Ireland’s only neighbor by land and erstwhile colonizer voted to walk out on the EU and its $17.3 trillion common market. The move to secede, called Brexit and triggered by a slim majority (51.9%) in a national referendum, has unfolded as a Shakespearean tragedy of reckless vanity and hubris, shaped by quasi-comical political chaos in London. The British powers have not been as riven by intraparty defections, parliamentary defeats, and general acrimony since 1886, when then–Prime Minister William Gladstone announced his support for Irish Home Rule. More than a century later, stiff-upper-lip Britain’s tumble into confusion and calamity has heightened plucky Ireland’s reputation for calm and clarity and turned it into an attractive destination for upwards of 12,000 once-British jobs, according to the City of London’s own estimates.

“Brexit is creating a contrast that hasn’t existed before,” says Kenneth Armstrong, a professor of European law at the University of Cambridge and author of Brexit Time. “It has unleashed Britain’s demons and given Ireland a halo. Ireland seems modern just as Westminster’s system of muddling through makes Britain seem like a Victorian relic.”

In other words, as Britain self-combusts, Ireland—with its young workforce, low taxes, and English fluency—is poised to pounce.

It’s not hard to find evidence of economic ambition in Ireland’s largest cities. In the Irish capital, the storied Trinity College is building the first unadjoined part of its campus since its founding in 1592: a billion-euro, 5.5-acre, 400-startup “innovation district” with the aim of turning the university into Europe’s MIT or Stanford. Apple—which has been in Cork, on the southern tip of the island, since 1980—expanded its campus in the city last year from 5,000 to 6,000 employees. In Limerick, Ireland’s third-biggest city, 2 billion euros’ worth of planning projects have been submitted over the past decade, according to estimates by EY-DKM Economic Advisory Services. In Galway, on the west coast, a two-acre, 100-million-euro, 370,000-square-foot waterfront complex is under development, a response to continued demand for Irish office space. Suddenly, Ireland has become a nesting ground for a flock of towering beasts once thought to be the stuff of fantasy: construction cranes.

Executives at some of the world’s largest banks have noticed. Ahead of the Brexit deadline, Bank of America Merrill Lynch and Barclays moved their EU headquarters from London to Dublin in a bid to minimize disruption; Barclays alone has shifted some $215 billion in asset management to the Irish capital. (Both banks declined to comment on the moves.) Rivals Citigroup, Morgan Stanley, JPMorgan, and Goldman Sachs have promised to bulk up their own Dublin operations in the face of U.K. uncertainty, even as they maintain offices in the British capital.

Several multinational tech companies with operations in Ireland have also unveiled plans to deepen their investment, though some say Brexit has little to do with it. Facebook, for example, has expanded its physical footprint in four sites across Ireland—its largest outside the U.S.—and plans to hire 1,000 new employees this year, bringing its total to more than 4,000. Google recently hired 1,000 workers and dedicated a building to its cloud-computing team. Both tech titans were responsible for some of the biggest real estate deals in Irish history; both, it should be noted, have also committed to sizable expansions in London’s Kings Cross district. (Facebook and Google declined to make executives available for comment.) Microsoft, which has operated in Ireland since 1985, will employ 2,200 people after its latest recruitment push, mostly at its campus in Leopardstown, about seven miles from central Dublin.

Last year Ireland counted 230,000 employees of multinational corporations, its highest-ever number and a significant slice of the country’s 4.8 million population. According to the Industrial Development Authority, Ireland’s foreign-investment arm, more than 4,500 jobs will move from London to Dublin as a direct result of Brexit—and with them a sizable chunk of what EY estimates to be a trillion-dollar asset exodus from Britain.

Cloistered with his aides in a private meeting room of Dublin Castle, the capital’s seat of political power since 1204, Tánaiste Simon Coveney, with a measured tone that betrays the enthusiasm of his words, argues that there’s nothing precarious about Ireland’s economic position, Brexit or otherwise. “The Irish economy is now more sustainable than it’s ever been,” he says. More than that, even: “We like to see ourselves as the most open economy in the world. Maybe [second] after Singapore.”

He would know. Coveney—who is at once Ireland’s deputy prime minister, its minister of foreign affairs, and its chief negotiator in Brexit matters—says Ireland is in “expansion mode.” He is overseeing a massive buildup of Irish embassies and consulates that he calls a Brexit-aware response to the global community’s “overreliance on the U.K.,” adding: “We’re doing it at a pace that hasn’t happened since independence.”

Closing Day Of World Economic Forum 2019
A gay man of Indian-Irish heritage in a country that decriminalized homosexuality in 1993, Leo Varadkar, Ireland’s head of government, embodies a more worldly, confident country.Simon Dawson — Bloomberg via Getty Images
Simon Dawson — Bloomberg via Getty Images

The push so far includes Irish embassies in Amman, Bogotá, Kiev, Manila, Monrovia, Rabat, Santiago, and Wellington, as well as consulates in Cardiff, Frankfurt, Jaipur, Los Angeles, Mumbai, Vancouver, and a pan-cultural hub in Tokyo called Ireland House. Buoyed by the imminent centennial of its nationhood, in 2022, there is a sense that Ireland is flexing its independence.

Irish courtship of Asia, that Western cure-all for economic development, has not gone unrequited. In November, Chinese electronics company Xiaomi partnered with Hong Kong telecom provider Three to launch a rash of new products following an announcement that Xiaomi would set up shop in Dublin. Last year Huawei, which also has Dublin offices, brought broadband optical fiber to 50 Irish towns as part of a contracted partnership with Vodafone. In June, Japan’s SoftBank revealed plans to pilot its “smart city” platform in Dublin as a global prototype.

“It’s all linked to a new confidence in Ireland,” Coveney tells Fortune. “You’re seeing Ireland essentially investing in a footprint.” The best foot forward, surely, yet his boosterism raises questions: Does the world need a European Singapore? Or even want one?

Irish government officials dislike when the country is called a tax haven for its 12.5% corporate tax rate and often respond by pointing to Hungary’s 9% rate, the lowest in the EU. (Britain’s is 19% and will drop to 17% in 2020. The average among EU countries is 21.68%, according to the Tax Foundation.) To Ireland’s credit, the workers coming to the country offer more heft than a post office box in the Cayman Islands. But the overall effect has made Ireland more like Europe’s Delaware than its Singapore. Too many headquarters spoil the broth.

“Moving companies to Dublin does not turn Dublin into London,” says Swati Dhingra, an economist at the London School of Economics. “The dispersal—to Paris, Munich, wherever—means that nobody will inherit the conglomerate force that London had.

You might get a bigger slice of pie, but the pie itself is getting smaller. There are no winners here. London is diminishing, but nowhere is becoming the next London.”

The ascent of Ireland as a global player and the subtle shift in power between it and the U.K. isn’t going over well with some in Britain—namely, the Brexit supporters who remain in Parliament. One Conservative member derided “the obdurate Irish government” for being overly concerned with border issues. Another was widely condemned in December for suggesting that Downing Street use the threat of economic damage, including food shortages, to compel Ireland to agree to a more favorable deal for the U.K.—an uncomfortable echo of the Great Famine of the 19th century. “We simply cannot allow the Irish to treat us this way,” an unnamed member of Parliament reportedly told a BBC columnist that same month, adding: “The Irish really should know their place.”

The Brexit decision remains hotly contested more than two years after the original vote, but despite Britain’s mixed bag of opinions, most agree it’s an existential inflection: Talk of Brexit-abetted Irish reunification has gained traction, and Scotland’s own roiling independence movement continues.

Seated along the cosmopolitan corridor of Dublin’s Capel Street—amid Brazilian, Chinese, and Eastern European grocery stores; Korean barbecue joints; Filipino lunch spots; Malaysian greasy spoons; Moroccan cafés; and sushi bars—Niamh Bushnell, the Irish government’s onetime commissioner of startups who now heads up nonprofit consultancy TechIreland, believes Ireland is poised to benefit from Britain’s momentary mania. “The U.K. doesn’t just have Brexit on its plate,” she says as she digs into a downright San Franciscan brunch of avocado toast with spiced chickpea, beetroot powder, and chorizo. “It’s in the Age of Brexit. Even without this mess, they’d be in a sorry state. They are Europe’s Trump—crazy, but in an unnerving, zeitgeisty way.”

The businesses moving to Dublin, Frankfurt, and Paris are not fly-by-night call centers, sweatshops, or hubs of unattractive work. Rather, they are the white-collar, green-collar, and gold-collar jobs upon which the 21st century’s economic power is being built. Ireland seems prepared to grab them all. “Small is beautiful. It keeps us agile,” says Bushnell, herself not quite 5 feet 3 inches. “We can’t scale nationally. We can only scale internationally. Instead of going wide, we are going deep. That has sent us up the value chain. We’re not call centers anymore. People are taking our calls now.”

If it sounds like the giddy optimism of millennial invincibility, that’s because it is: With a median age of 35.9, Ireland has the youngest population in the EU, putting it on par with such booming populations as those of Brazil, China, Qatar, Singapore, and Thailand. (The EU-wide median is 42.8; Germany claims the highest median age at 45.9.) “We always had cachet but were seen as riding coattails, either of the U.K. or the EU,” says Daniel Mulhall, an Irish ambassador who has served in Britain, Germany, India, and is currently ambassador to the U.S. Times have changed. “We became our own country,” he says. “We have our own ideas at last.”

On a brisk winter day in Dublin, I join Des Traynor, a founder of local business software startup Intercom, for a midday stroll through St. Stephen’s Green. A onetime foxhole for rebels in the 1916 Easter Rising, the public park is now a tranquil and tony oasis at the end of a busy shopping thoroughfare. Traynor, 37, is extolling the virtues of Irish culture: “Nothing but saints and scholars, they called us. As it turns out, saints and scholars are exactly what we need these days.”

As we walk along the path, the tech entrepreneur explains why he believes Ireland’s recent economic luck goes beyond a Brexit bump. “Our real talent is hope. And kindness. We don’t gloat, more like bemusement at how fate works its way out,” he says. “The Celtic Tiger had us thinking money didn’t suit us. It was more that arbitrage, marketing, cybersquatting, and the stupidity of stupid money didn’t suit us.” He cocks his head at a bevy of swans idling on a lake and pulls in a whiff of fragrant park air. “There’s more to business than numbers.”

Dublin?s Grand Canal Dock
A former industrial hub, Dublin’s Docklands have become home for tech companies (Airbnb, Facebook) and finance firms (Citigroup, Morgan Stanley) alike.Irish Independent/eyevine/Redux Irish Independent /eyevine/Redu
Irish Independent/eyevine/Redux

A cultural revolution has certainly helped make Ireland more internationally attractive. By referendum, Ireland last year rewrote its constitution to legalize abortion, just three years after it legalized gay marriage, also by referendum. The Irish government last year barred the Catholic Church, which controls 90% of the school system on its behalf, from admissions discrimination on religious grounds. Look no further than Taoiseach Varadkar to mark social progress; he is a gay, unmarried, 38-year-old man of Indian and Irish descent who is the head of government in a country that only decriminalized homosexuality in 1993. In the U.S., this would be the equivalent of the first black president taking office in 1888, not long after the abolition of slavery. “It’s no coincidence,” Traynor says, “that the people fighting for our future here are the ones who can still remember living in its past.”

Ireland is, however, not without its problems. Income inequality is worsening. (At 150,000 euros, the average Facebook salary in Ireland is triple that of the average Irish worker.) With 37% of its foreign investment from the U.S., Ireland remains susceptible to an economic slowdown across the pond. And those Brexit-boosted numbers won’t last forever. In February, the European Commission revised downward its growth predictions for Ireland for the year, from 4.5% to 4.1%. The culprit? Uncertainty about the fallout from Britain’s exit from the EU, of course.

Patrick Walsh comes to Grogan’s Castle Lounge, largely locked in amber in Dublin since 1899, precisely because he’s confident that it hasn’t changed. It’s cash only. There’s neither television nor music, and don’t even think about asking for Wi-Fi. Walsh, the founder of Dogpatch Labs, an incubator touted as the silicon savior of the city by the likes of Prince Harry himself, calls it an oasis of authenticity—and a barometer of it too.

“We don’t know how to be rich,” Walsh says, noting that the Gaelic toast “Is fearr an tsláinte ná na táinte” translates as “To health not wealth.” He adds with equal parts pride and woe: “We barely know how to be European. We’re kind of our own thing.”

Like many tech entrepreneurs who call Dublin home, Walsh has seen the ups and downs of Ireland’s economy. His office in the city’s Docklands district—the “Digital Docklands” to some—is a short walk to outposts for Airbnb, Facebook, Google, and Twitter. It’s also steps away from JPMorgan, Morgan Stanley, and Citigroup. Washing down bites of a ham-and-cheese toastie with Guinness, Walsh offers a history lesson: “When this was all a British stronghold and they were pushing back the Gaeltacht”—the areas where the Irish language took primacy—“they called Dublin and this whole area the Pale. There’s a wall! And the worst thing a right honorable Englishman could do was go beyond that wall—beyond the Pale. It wasn’t safe.”

Walsh considers Ireland’s recent fortunes and laughs. “We’re beyond the pale now, aren’t we? Time to hold on to our hats,” he says. He raises his eyebrows, spirits, and pint in one fluid move, then grins. “But hey—we’ve got hats.”

This article originally appeared in the March 2019 issue of Fortune.