LONDON, Nov 17 (Reuters) - Neighbouring Ireland remains one of Britain’s largest export markets despite efforts to woo the big emerging economies, a factor that could draw the British into efforts to prop up the Irish economy.
Finance minister George Osborne has so far offered only verbal support for Ireland, but the Financial Times reported on Wednesday there were signs that Britain was considering providing its own direct loans as part of an aid package.
“Ireland is our closest neighbour and it’s in Britain’s national interest that the Irish economy is successful and we have a stable banking system,” Osborne said ahead of a meeting of European Union finance ministers in Brussels.
“So Britain stands ready to support Ireland in the steps that it needs to take to bring about that stability,” he added.
Britain is not part of the euro zone but could be asked to contribute some 6 billion pounds ($9.5 billion) under the European Financial Stabilisation Mechanism, leaving aside any bilateral aid.
A Treasury spokesman said Ireland has yet to ask for help and declined to comment on speculation about how Britain might get involved.
Prime Minister David Cameron has led trade delegations to China and India this year, but British trade with Ireland is still greater than its business with the huge BRIC emerging economies -- Brazil, Russia, India and China -- combined.
British retailers such as Tesco (TSCO.L) and Marks & Spencer (MKS.L) have a high-profile presence in Dublin, and Ireland is also a crucial market for goods produced in Northern Ireland -- which is trying to wean itself off reliance on the British public sector for employment.
“The overall exposure to the Irish economy is by no means trivial, it’s something which is relevant to concern about financial stability in the UK,” Bank of England Governor Mervyn King said this week.
Showing the close interdependency between the two economies, British food manufacturer Northern Foods NFDS.L said on Wednesday that it had agreed to merge with Ireland’s Greencore GNC.I to create major player in the ready meals market.
Like other leading Irish companies such as budget airline Ryanair (RYA.I), insulation maker Kingspan (KSP.I), drugs wholesaler United Drug UDG.I and building materials giant CRH (CRH.I), Greencore (GNC.L) has a stock market listing in London as well as Dublin.
For many of those companies the UK has grown to become a bigger source of revenues than Ireland.
In a vote of confidence in Ireland, Northern Foods and Greencore said the new company formed by their merger would be based in Dublin, specifically citing the attractiveness of its low 12.5 percent corporation tax rate. [ID:nLDE6AG087]
Britain, seeking to trade its way back to economic health, would like to see that rate increased to closer to its own levels. Corporation tax in Britain will fall to 27 percent from next April and the government plans to bring it down to 24 percent in subsequent years.
Bookmaker Paddy Power PAP.I showed on Wednesday that Irish companies can continue to grow through the current crisis, saying it planned to create 1,440 new jobs in Ireland, the UK and Australia over the next three years. [ID:nLDE6AG06H]
Underlying how the company is thriving through talk of bailouts and recession, shares in Paddy Power are trading at record highs after it said sales growth in Britain, Australia and online had helped mitigate falls in its home market. (Editing by Catherine Evans)