Citigroup, Ryanair Bemoan Lingering Brexit Woes: New Economy

The new Brexit Deal for Northern Ireland between the UK and the European Union represents progress but isn’t enough to fully eliminate disruption caused by Britain’s exit from the bloc, business leaders said at the Bloomberg New Economy Gateway Europe event near Dublin.

(Bloomberg) — The new Brexit Deal for Northern Ireland between the UK and the European Union represents progress but isn’t enough to fully eliminate disruption caused by Britain’s exit from the bloc, business leaders said at the Bloomberg New Economy Gateway Europe event near Dublin.

The so-called Windsor agreement is an “immeasurably better deal” which offers a framework for the UK and EU to move forward, Michael O’Leary, chief executive officer of Ryanair Holdings Plc, said on a panel. He’s somewhat optimistic about the leadership of Prime Minister Rishi Sunak and Chancellor Jeremy Hunt, but said the UK’s trading relationship with the EU still has room for improvement.

The New Economy Gateway series brings together leaders from the private and public sectors to discuss, analyze and propose solutions to the economy’s most pressing problems. This week’s event near Dublin is focusing on the theme of “Reglobalization” — exploring the forces transforming trade and industry, from banking to aviation and energy to semiconductors.

Join us later for conversations with DeepMind’s Lila Ibrahim, the European Central Bank’s Pablo Hernandez de Cos and Eurogroup President Paschal Donohoe.

Key Developments

  • Ryanair CEO Sees Ukraine Aviation Opportunity Once War Ends
  • Citi’s Braden Predicts More Brexit Moves to Satisfy EU Watchdogs
  • ECB’s Lane Sees Rate Hike in May, Data to Determine Size
  • UniCredit CEO Says Its ‘Steady as She Goes’ Amid Banking Worries
  • US and Europe Wrangle Over Green Subsidies to Avoid a Trade War

(All times CET)

AR Headsets ‘Set for Major Breakthrough’ (2 p.m.)

Peggy Johnson, CEO of the privately held augmented reality company Magic Leap Inc., said she expects that consumers will be using augmented reality headsets in the next five years, with the market becoming “as big as the mobile phone industry.”

Augmented reality headsets will become smaller, lighter and “more powerful over time,” Johnson said, making them more relevant for everyday use. After struggling to make its own headset a hit with consumers, she noted that Magic Leap has succeeded in enterprise markets via integration into medical and factory ecosystems.

Investors ‘Going Back to Fundamentals’ After SVB (1:30 p.m.)

Since the collapse of Silicon Valley Bank, many investors are returning to fundamentals and seeking out proof of a profitable revenue plan and evidence of expansion, according to Elodie Dupuy, founder and managing partner at early growth investment fund Full In Partners. They are also viewing deals with higher degree of scrutiny.

“I think you’re going to see a reversion to more professional, institutionalized investors who have a framework, who have a more repeatable investment strategy,” Dupuy said during a panel discussion.

O’Leary Sees Double—Digit Fare Hikes (1 p.m.)

Ryanair expects double-digit fare increases in Europe this year after flight prices rose by 14%-15% in 2022, CEO O’Leary said in an interview with Bloomberg TV.

Business is “booming and getting boomier” as Europe continues to emerge from the coronavirus pandemic, while fares are rising due to limited capacity, he added. “It’s still cheaper to fly in Europe but there’s no doubt that it’s getting a little bit more expensive, particularly as we move through the summer of 2023,” O’Leary said.

Brexit’s ‘Messier Part Still to Come’ (12:30 p.m.)

With additional asset moves from London to the EU on the horizon, Citigroup Inc.’s Europe head Kristine Braden speculated that “the messier part is yet to come” in the lender’s adjustment to Brexit.

Despite a pause during the pandemic, Braden said Citi is now relocating staff to the continent. The bank will continue to recruit and grow both its London hub and EU offices, she said during a panel on navigating Europe’s new economic landscape, noting that the banking sector’s efforts to meet EU rules and client needs are “fragmenting the industry a little bit.”

O’Leary Says Brexit ‘Unbelievably Messy’ (12 p.m.)

Ryanair’s O’Leary said Brexit has been “unbelievably messy” for companies, and has led to the UK labor market being “broken.” The discount airline has been forced to hire European and non-European staff on visas that O’Leary said are “ludicrously” expensive at £3,000 ($3,726) pounds each.

“The problem we find dealing with the government is there’s an obsession in most departments to find excuses that show where Brexit benefits,” O’Leary said. “Duty free is back on flights to and from Europe, that’s about about the only benefit.”

Chip Sector ‘Needs Clarity on Export Controls’ (11:50 a.m.)

Chipmakers need clarity from policymakers on the export controls impacting the sector, according to NXP Semiconductors NV Chief Executive Officer Kurt Sievers. He signaled his support for export restrictions but stressed that chipmakers need to know what policymakers are planning that could impact their supply chains.

“There doesn’t seem to be a clear road map on what to expect going forward,” Sievers said. He added that he believes there’s a 100% compliance rate among semiconductor companies, but that they can’t control shadow markets.

EU ‘Committed to Open Markets’ (11:30 a.m.)

The EU is committed to open markets and globalized supply chains despite a “harsher and more adverse” geopolitical environment, according to a top European Commission official.

Denis Redonnet, the EU executive’s chief trade enforcement officer, said the bloc would be sticking to its “open market strategy” amid concern that the US Inflation Reduction Act, tensions between the West and China, and the war between Russia and Ukraine will lead to greater protectionism.

“It’s about ensuring the benefits of an open market strategy,” Redonnet said. “What we need to do is make sure that we focus on resilience in a measured way where we look at where we have real vulnerabilities.”

Bank Failures ‘Isolated Cases’: Orcel (11:15 a.m.)

while UniCredit SpA Chief Executive Officer Andrea Orcel said that recent bank failures highlight the necessity of effectively applying regulation.

Orcel said that while bank failures “were isolated cases” and “were pretty much idiosyncratic,” they also “highlighted that regulation has to be applied consistently across not only banks of any size but also all financial intermediaries.”

European banking regulation has worked during the recent turbulence, but it’s unrealistic to expect banks to be able to eliminate all risks — doing so would negate the role they’re meant to play in the economy, Orcel said.

IATA Chief Expects Firm Demand for Air Travel (11 a.m.)

Strong demand for air travel is expected to continue through the summer as the industry rebounds from Covid lows, according to IATA Director General Willie Walsh.

Ticket prices are likely to remain high, driven by higher costs — especially for jet fuel, which remains expensive, Walsh, the former CEO of British Airways parent IAG, said in an interview with Bloomberg Radio. Capacity remains below where it was in 2019, partly due to aircraft delivery delays and a shortage of spare parts, he added.

“We get a lot of airlines who have aircraft available but these aircraft are out of service because they can’t get the spare parts to keep them fully operating,” Walsh said.

UK Lagging on Innovation: AstraZeneca (10 a.m.)

AstraZeneca’s decision to site a $360 million manufacturing facility in Ireland instead of the UK was motivated by a more attractive Irish operating environment that enables the drugmaker to drive innovation and pursue its climate agenda, according to the company’s head of operations.

The UK government should “act faster around innovation” and “really give incentive for companies to be driving that innovation,” AstraZeneca’s Pam Cheng said in an interview with Bloomberg Radio. The choice of Ireland did not only depend on tax and other financial implications, Cheng said, adding that “the more important thing is that overall operating environment.”

IDA’s Lohan Sees Investment Headwinds (9 a.m.)

Ireland still has a “very strong, robust pipeline” of foreign investment but is facing headwinds and the volume of incoming business is set to decline compared with the past two years, according to the new head of the country’s investment promotion agency.

While some sectors, including financial services, biopharmaceuticals and medical devices, are “continuing to forge ahead,” technology companies are suffering in part due to a deterioration in consumer sentiment, the agency’s CEO, Michael Lohan, told Bloomberg Radio in his first interview since taking over on Monday.

ECB’s Lane Sees Rate Hike in May (9 a.m.)

Another increase in interest rates is appropriate next month, with data due in the coming weeks to determine the size of the move, according to ECB Chief Economist Philip Lane.

“As of now, two weeks away, I think the baseline is that we should indeed increase interest rates in May,” Lane said in a TV interview before Bloomberg’s New Economy Gateway Europe conference near Dublin. “Exactly what we do — I’m going to wait until we have that data before deciding.”

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–With assistance from Lucy White, Marion Dakers, Peter O’Dwyer, Morwenna Coniam, Stephen Carroll, Francine Lacqua, Anthony Palazzo, Agatha Cantrill, Benedikt Kammel, Ellen Milligan, Siddharth Philip, Celia Bergin and Lynn Doan.

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