A "small number" of Irish firms are likely to see their credit ratings cut if Britain leaves the European Union without a transition deal but there could be a no deal silver lining for the country's services sectors, S&P Global said today.
Ireland's export-focused economy is considered the most vulnerable of the European Union member states to a disruptive Brexit.
In a new report, S&P said the agricultural sector would be hardest hit by a no-deal Brexit but banks were unlikely to see many "near-term" rating moves and it did not expect to downgrade Ireland's sovereign rating.
"What's clear today is that the Irish economy is booming," S&P credit analyst Frank Gill said.
He cited the highest level of net immigration in a decade and a recent return to a government budget surplus as key positives for the EU's fastest growing economy.
"Certainly our base case is that a no deal does not move the needle on the sovereign given all the other credit strengths," he added, while acknowledging that sectors such as agriculture and food processing faced enormous uncertainties.
S&P, which rates more than 50 firms in Ireland, has rated Irish sovereign debt as A+ with a stable outlook since June 2015.
It said it still expected the UK to reach a deal with the EU but that the risks that it does not were rising.
A no-deal Brexit would increase pressure on Irish issuers with rating actions envisaged for a small number whose rating performance is already "somewhat challenged."
While some larger agricultural firms have the flexibility, scale and contingency plans to withstand any disruption, smaller companies without the ability to diversify away from the UK market will struggle, S&P's Patrick Drury Byrne added.
However, S&P said that by focusing primarily on vulnerable indigenous exporters, most economists sidestepped the question of what Brexit means for the current boom in Ireland's dominant services sector.
S&P itself today officially opened its new European headquarters in Dublin.
It said the pace of services employment growth was likely to survive a no-deal Brexit and even accelerate in some of Ireland's largest sectors, including financial services, in the event of a no-deal outcome.
"We believe that the silver lining for Ireland - in the medium term - could be its ultimately positive effect on the labour-intensive services sectors," the report said.
S&P said its new Irish headquarters will be the hub of its EMEA network spanning 13 offices.
John Berisford, President of S&P Global Ratings, said that Ireland has a vibrant financial services ecosystem
"Historically, Ireland has shown it can play a leading role in innovation in capital markets as well as in advancing new financial technology. We were attracted by the country's talent pool, connections to the rest of our European network, and its strong track record as an operating environment," Mr Berisford said.
"Our new Dublin office is a key milestone in our journey to expand into new markets and attract talent," he added.
IDA Ireland's CEO Martin Shanahan said that S&P Global ratings choice of Dublin contributes to Ireland's reputation as a hub for the international financial services sector within the EU.
