GDP 7.2% 7.4% 3.5% 3.0% GNP 4.4% 7.6% 3.4% 2.8% Imports … · 2019-10-22 · Ireland’s robust economic performance is continuing but is facing existential threats in the short-term

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Irish Economy Q1 2019 Health Check

Dodging bullets

Economic Research 04 Feb 2019

06:30 GMT

Irish outlook hinges on binary Brexit outcome

Ireland’s robust economic performance is continuing but is facing existential

threats in the short-term due to the potential of a disorderly exit of its closest

trading partner. We assume that the UK will leave the EU in an orderly manner on

March 29 or (more likely) later, but the risks have risen over recent weeks of

disorderly exit. A game of chicken is now in train between the UK and the EU. How

this game plays out will determine whether the Irish economy continues to grow

healthily over the next eighteen months or potentially falls into recession.

Government should act as a counter to rapid private sector growth

Under the scenario of an orderly Brexit, we are forecasting core domestic demand

growth of 4.5% in 2019 and 3.7% in 2020. The key drivers of this growth are the

robust and sustainable growth in consumer spending and ongoing recovery in the

construction sector. Government spending is also making an unnecessarily large

contribution to economic growth when it should be acting to take some steam out

of an economy that is at full employment in 2019.

Ten key issues for 2019 examined

We lay out ten key issues for Ireland in 2019. In addition to Brexit, they include

the role of US investment flows, the housing market, full employment, corporation

tax threats, household releveraging and the office cycle peak

0%

1%

2%

3%

4%

5%

6%

2015 2016 2017 2018f 2019f 2020f

Core domestic demand growth

yoy g

row

th

Source: CSO, Goodbody

4.2%

3.6%

2.7%

0.9%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

2019 2020

Budget 2019 GDP projections No Deal DoF GDP projections

Irish GDP growth under different Brexit outcomes

yoy %

Source: Goodbody, DoF

Economic Indicators

2017 2018f 2019f 2020f

Growth Components

Consumption 1.6% 3.1% 3.0% 2.9%

Government 3.9% 5.1% 4.1% 2.6%

Investment -31.0% -0.8% 6.6% 5.1%

Domestic Demand -12.4% 2.1% 4.4% 3.6%

Exports 7.8% 9.7% 2.7% 2.7%

Imports -9.4% 4.9% 3.1% 3.0%

GDP 7.2% 7.4% 3.5% 3.0%

GNP 4.4% 7.6% 3.4% 2.8%

Prices

Consumer Price Inflation 0.3% 0.5% 0.9% 2.0%

House Price Inflation (end-year) 12.1% 7.0% 6.0% 5.3%

Wage Inflation (GBS) 2.0% 2.5% 3.0% 3.3%

Fiscal

GGB / GDP -0.4% 0.1% -0.1% 0.2%

Debt/GDP 68% 63% 61% 59%

Consumer Profile

Employment Growth (end year) 3.1% 3.1% 2.5% 2.0%

Unemployment Rate (end-year) 6.4% 5.2% 4.9% 4.6%

Exchange Rates (Avg for the year)

€/$ 1.12 1.18 1.13 1.16

€/£ 0.88 0.88 0.86 0.90

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

YoY (4-q

uart

er

avera

ge)

Source: CSO

Wage growth taking off with full employment near

Economist

Dermot O'Leary

+353-1-641-9167

[email protected]

Alexander Wilson

+353-1-641-9225

[email protected]

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Page 2 04 Feb. 2019

Economist Dermot O'Leary

Email [email protected]

Tel +353-1-641-9167Economy - Ireland

DOMESTIC MACRO DATA 2016a 2017a 2018f 2019f 2020f

Growth Components

Consumption 4.0% 1.6% 3.1% 3.0% 2.9%

Government 3.5% 3.9% 5.1% 4.1% 2.6%

Investment 51.7% -31.0% -0.8% 6.6% 5.1%

Domestic Demand 20.6% -12.4% 2.1% 4.4% 3.6%

Exports 4.4% 7.8% 9.7% 2.7% 2.7%

Imports 18.5% -9.4% 4.9% 3.1% 3.0%

GDP 5.0% 7.2% 7.4% 3.5% 3.0%

GNP 11.5% 4.4% 7.6% 3.4% 2.8%

Housing Statistics

Completions 9,907 14,435 18,816 22,044 25,008

Average House Price (€k) 229,341 257,148 275,270 291,774 307,357

House Price Inflation (end-year) 9.0% 12.1% 7.0% 6.0% 5.3%

Mortgage Credit Growth (end-year) -3.5% -4.4% 2.0% 3.0% 3.7%

Prices

Consumer Price Inflation 0.0% 0.3% 0.5% 0.9% 2.0%

Wage Inflation (GBS) 1.3% 2.0% 2.5% 3.0% 3.3%

Fiscal

Exchequer Balance -1,013 1,907 107 -2,572 -974

Exchequer Balance / GNP -0.5% 0.8% 0.0% -1.0% -0.3%

General Government Balance -1,414 -1,035 422 -397 761

GGB/GDP -0.5% -0.4% 0.1% -0.1% 0.2%

GGB/GDP - ex banking costs -0.5% -0.4% 0.1% -0.1% 0.2%

Debt/GDP 73% 68% 63% 61% 59%

Consumer Profile

Employment Growth (end year) 3.7% 3.1% 3.1% 2.5% 2.0%

Employment Growth (Full-year average) 3.6% 2.9% 3.1% 3.0% 2.1%

Unemployment Rate (end-year) 7.6% 6.4% 5.2% 4.9% 4.6%

Debt/Disp. Income 145% 133% 129% 125% 122%

Interest Rates (At year end)

ECB 0.05% - - - -

BoE 0.50% 0.25% 0.50% 0.75% 0.75%

Fed 0.50% 0.75% 1.50% 2.50% 3.00%

Trade

Current Account (€m) -11,372 24,925 39,360 40,525 41,775

CA as a % of GDP -4.2% 8.5% 12.3% 12.0% 11.8%

Exchange Rates (Average for the year)

€/$ 1.11 1.12 1.18 1.13 1.16

€/£ 0.82 0.88 0.88 0.86 0.90

SOVEREIGN ANALYSIS 2016a 2017a 2018f 2019f 2020f

Debt/GDP

Austria 84% 79% 76% 73% 68%

Belgium 106% 103% 102% 100% 99%

Cyprus 107% 98% 106% 100% 91%

Finland 63% 61% 60% 60% 58%

France 97% 97% 86% 96% 97%

Germany 68% 64% 60% 56% 54%

Greece 181% 179% 178% 170% 167%

Ireland 73% 68% 63% 61% 59%

Italy 73% 68% 66% 63% 56%

Luxembourg 40% 40% 36% 38% 38%

Malta 21% 23% 23% 23% 21%

Netherlands 56% 51% 47% 43% 42%

Portugal 62% 57% 54% 50% 47%

Slovakia 130% 126% 123% 120% 117%

Slovenia 52% 51% 49% 47% 44%

Spain 79% 74% 69% 65% 63%

Eurozone avg. 99% 98% 98% 96% 95%

GGB/GDP

Austria -1.6% -0.7% -0.5% -0.2% 0.1%

Belgium -2.5% -1.0% -1.1% -1.3% -1.3%

Cyprus 0.3% 1.8% 2.0% 2.2% 2.9%

Finland -1.8% -0.6% -0.7% -0.2% -0.1%

France -3.4% -2.6% -2.3% -2.8% -1.7%

Germany 1.0% 1.3% 1.2% 1.4% 1.1%

Greece 0.6% 0.8% 0.4% 0.2% 0.6%

Ireland -0.5% -0.4% 0.1% -0.1% 0.2%

Italy -0.5% -0.3% -0.2% -0.2% 0.2%

Luxembourg 0.3% 0.5% 0.5% 0.5% 0.1%

Malta 1.6% 1.5% 0.9% 0.7% 0.9%

Netherlands 1.0% 3.9% 1.1% 1.3% 0.7%

Portugal 0.4% 1.1% 0.7% 0.9% 1.0%

Slovakia -2.0% -3.0% -0.9% -0.6% -0.2%

Slovenia -2.2% -1.0% -0.9% -0.3% -0.1%

Spain -1.9% - 0.5% 0.4% 0.2%

Eurozone avg. -4.5% -3.1% -2.6% -1.9% -1.9%

10Y Spread to Germany 2015a 2016a 2017a 2018a Current

Austria 0.27 0.21 0.14 0.25 0.21

Finland 0.29 0.14 0.16 0.31 0.25

France 0.37 0.48 0.34 0.47 0.40

Netherlands 0.17 0.14 0.10 0.14 0.10

Belgium 0.34 0.33 0.20 0.53 0.45

Spain 1.14 1.19 1.11 1.18 1.05

Italy 0.97 1.62 1.56 2.51 2.44

Portugal 1.87 3.55 1.48 1.47 1.32

Greece 7.44 6.86 3.65 4.11 3.70

Ireland 0.51 0.55 0.24 0.65 0.56

Source: FactSet & European Commission

0%

5%

10%

15%

20%

25%

30%

2014 2015 2016 2017 2018f 2019f 2020f

GDP GNPSource : Goodbody

Irish economic growth

0%

1%

1%

2%

2%

3%

3%

4%

4%

5%

2014 2015 2016 2017 2018f 2019f 2020f

Consumption GrowthSource : Goodbody

Consumption Growth

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04 Feb. 2019 Page 3

Q1 2019 Health Check – Dodging bullets

The Irish economy starts 2019 with a set of opposing forces between internal dynamism and

international risks. Internally, domestic demand continues to power the economy forward, with

significant momentum entering the year. We estimate that domestic demand grew by c.6% in 2018.

Externally, a hard-Brexit presents an existential threat to confidence, investment and exports in the

short-term, even if we believe that the positive benefits from higher levels of FDI can balance off the

negative side-effects due to lower trade flows in the medium-term. Secondly, increasing concerns about

a slowdown in the global economy present risks to a small, open economy like Ireland.

Forecasts for the Irish economy at this point are subject to a high level of uncertainty around the

assumptions for the UK’s exit from the European Union. We assume there is an extension to the Article

50 end-date of 29 March 2019 as a result of no clear consensus on the Withdrawal Agreement, the

future trading arrangements and a blocking majority against a no-deal scenario. While this would

prolong uncertainty around spending and investment decisions in the UK, it would at least avoid the

catastrophic consequences of the UK crashing out of the UK without a deal.

In those circumstances, Ireland looks set to continue its superior growth performance in 2019; we

forecast that core domestic demand will grow by 4.5% in 2019. This will put it among the fastest

growing economies in the euro area once again. This is a now familiar position for Ireland, following its

rapid expansion since 2013. The two major drivers of this increase in spending are the consumer and

construction, with a growing contribution from current government spending. The major issue now

though is how it deals with the issues of an economy at full capacity. Irish policymakers should know

only too well that good economic times should be used to prepare for an inevitable turn in the cycle. In a

fiscal context this should mean building up buffers and carefully managing public spending. Recent

evidence suggests that some of the discipline of the 2009-2015 period is being lost.

Irish growth forecasts

2015 2016 2017 2018f 2019f 2020f

Consumption 3.6% 4.0% 1.6% 3.1% 3.0% 2.9%

Investment 50.8% 51.7% -31.0% -0.8% 6.6% 5.1%

Core investment 8.7% 11.2% 6.2% 17.4% 9.5% 7.1%

Government 1.4% 3.5% 3.9% 5.1% 4.1% 2.6%

Domestic Demand 15.9% 20.6% -12.4% 2.1% 4.4% 3.6%

Modified domestic demand 4.8% 5.7% 3.3% 4.9% 4.5% 3.6%

Core domestic demand 4.0% 5.1% 2.9% 6.1% 4.5% 3.7%

Exports 39.3% 4.4% 7.8% 9.7% 2.7% 2.7%

Imports 33.2% 18.5% -9.4% 4.9% 3.1% 3.0%

GDP 25.1% 5.0% 7.2% 7.4% 3.5% 3.0%

GNP 13.6% 11.5% 4.4% 7.6% 3.4% 2.8%

Source: CSO, Goodbody

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Page 4 04 Feb. 2019

Risks to forecasts lie to the downside

Recent events in the UK House of Commons have raised the risk of a “no deal” Brexit as the UK and the

EU engage in the “game of chicken” over the coming weeks. With this in mind, we recognise that the

balance of risks to forecasts is very much to the downside. But what are the potential downside risks in a

“no deal” scenario? The Department of Finance laid out its projections based on modelling work done

with the ESRI and using scenarios by NIESR in the UK.

In 2019, GDP is estimated to be 1.5% lower at 2.7% while 2020 GDP growth is estimated to be 0.9%,

2.7% lower than its baseline scenario. The level of GDP is expected to be 4.25% lower in 2023 than its

baseline scenario with a hard-Brexit outcome. However, that would still leave GDP 12% higher than the

2018 level by the end of 2023.

To us, these estimates look somewhat optimistic. While recognising that the trajectory of GDP is heavily

influenced by the performance of the internationally traded sector, most of which is not affected by UK

demand, the potential shock to confidence, the financial sector and trade flows in a no-deal scenario

would, in our view likely result in the Irish economy falling into recession if the hard-Brexit outcomes for

the UK that have been modelled by the Bank of England were to come to pass. The economic, political

and social consequences of the coming eight weeks could not be higher.

Irish growth under a hard-Brexit

Source: DoF

GDP out to 2023 under a “no deal”

Source: DoF

4.2%

3.6%

2.7%

0.9%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

2019 2020

Budget 2019 GDP projections No Deal DoF GDP projections

yoy %

250,000

270,000

290,000

310,000

330,000

350,000

370,000

DoF GDP under an orderly agreed Brexit GDP under No Deal DoF projections

€m

Source: DoF, Goodbody

GDP would be 4.25% lower

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04 Feb. 2019 Page 5

10 key issues for the Irish economy in 2019

We begin 2019 once again with a list of what we believe are the ten biggest issues that investors should

be focusing on when assessing the prospects for the Irish economy:

1. Brexit – Clear & present danger

Ireland is currently in the eye of the political storm in the Brexit discussions. In concert with the EU, it

continues to insist on a backstop being part of the Withdrawal Agreement (WA) that ensures there will

be no hard border on the island of Ireland if a future trade agreement does not result in this outcome.

While this is not the only issue holding up the passing of the WA in the House of Commons, it does

appear to be the most contentious.

There is still a large range of possible outcomes from here, but our assumption is that a no-deal, crash-

out scenario will be avoided through an extension of the Article 50 deadline of the 29 March. There is a

coalition of MPs coming together to attempt to take control of the process, and we are likely to see

further unprecedented parliamentary manoeuvres in the coming weeks, while cross party support is also

possible.

If the UK was to crash out of the EU without a deal, the consequences for the Irish economy in the

short-term are very large indeed. This partly explains why the share prices of Irish PLCs with either

significant UK or domestic Irish exposure have performed so poorly over the past twelve months, given

the damage that these tail risks imply. According to the research commissioned by the Irish

government, GDP would be 7% lower in a WTO scenario over the medium-term relative to a baseline

scenario of no-Brexit. This effect would come through the trade channel, with agri-food being the

industry that would see the largest negative impact.

While we agree that the confidence hit, the impact of tariff and non-tariff barriers and the potential

tightening of financial conditions would be very damaging to the Irish economy in the short-term, the

medium-term consequences are unlikely to be as large as those suggested in these types of models as

they do not make allowance for the potential positive implications of Brexit on Irish FDI flows.

Even if a hard-Brexit does not occur, Ireland is already benefiting from an influx of UK based firms

deciding to locate their businesses in Ireland as a precaution against that scenario. The IDA has

identified 45 separate investment wins that it attributes to Brexit. While the scale of jobs that these

relocations will lead to is small at this point, it has been the norm for companies to start with a small

number of employees and grow from there. In addition, given the similarities between the UK and

Ireland (legal, language, education etc), Ireland is an excellent substitute for investment that would

have gone to the UK in the future, but is constrained by, at the least, the uncertain market access

arrangements with the EU in the future.

Medium-term impact of Brexit on Ireland

EEA

Scenario

Customs

Unions

Scenario

FTA

Scenario

WTO

Scenario

GDP

Impact -2.8% -4.3% -4.3% -7.0%

Exports -3.3% -4.4% -4.5% -7.7%

Imports -3.5% -4.7% -4.8% -8.2%

Source: Copenhagen Economics

Sources of Brexit impact on Ireland

Source: Copenhagen Economics

-0.8% -0.8% -0.8% -1.0%

-1.3%

-2.3% -2.3%

-4.9%

-0.6%

-1.1% -1.1%

-1.1%

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%EEA CU FTA WTO

Tariffs and customs Regulatory divergence Service barriers

-2.8%

-4.3%(-3.4% w/o

customs cost)

-4.3%

-7%

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Page 6 04 Feb. 2019

In a European context, Dublin appears to be leading the race to attract companies that are making plans

to ensure EU market access into the future. Towards the end of 2018, Knight Frank estimated that

Dublin was the chosen destination for 48 companies, with Luxembourg coming in second at 39 (see

chart). Our own analysis shows that this trend is being dominated, unsurprisingly, by companies in the

financial sector, representing 80% of the office take-up of these Brexit relocators.

2. FDI – In good health, but what happens when the US sneezes?

Foreign direct investment from multinationals has been fundamental to Ireland’s expansion over recent

years. There is now c.230,000 directly employed by companies supported by the IDA (Ireland’s FDI

agency), representing 10% of total employment. Including indirect employment, these companies

employ c.18% of the workforce. The United States is Ireland most important investment partner by far,

accounting for close to 75% of these jobs. This exposure has grown significantly over recent years.

Given the importance of FDI for the Irish economy, we were concerned that the US tax reforms

introduced at the beginning of 2018 would hamper investment. To date, these concerns have not

materialised. Indeed, 2018 represented the best year for net new jobs in IDA-supported companies

since 2000, something we flagged in our IDA Tracker in the Q4 2018 Health Check. According to the

IDA, there were 22,785 net new jobs created in 2018 in FDI companies. FDI employment growth

(+8.8% yoy) continues to outpace non-FDI employment growth (+2.1% yoy). The IDA’s clients are also

significant employers in terms of wages; with average salaries at €66,000 in 2017, well above the

national average (€46,402).

The US remains Ireland’s most important source of investment by quite a distance. Our IDA Tracker

shows that 76% of IDA announcements originated from US firms in the 2012-2018 period, far ahead of

the next best (RoW, 8%). Roughly 160,000 workers are directly employed by US firms. When accounting

for the indirect impact of these US firms operating in Ireland, close to one in seven private sectors in

Ireland are dependent on US firms. 80% of Irish manufacturing output and over 60% of the value add of

the information and communications technology sector comes from US companies.

Brexit relocations by city

Source: Knight Frank

Brexit relocations to Dublin by sector

Source: Goodbody

Employment growth led by FDI

Source: IDA, Goodbody

IDA Tracker shows 2018 was a record year

Source: IDA, Goodbody

0 10 20 30 40 50 60

Brussels

Madrid

Amsterdam

Paris

Frankfurt

Luxembourg

Dublin

Financials

80%

Legal

13%

Insurance

6%

FinTech

0%

Business

Services

1%

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04 Feb. 2019 Page 7

Beyond the risks associated with tax reform (at a US, EU or OECD level), there is also the big issue of at

what stage the economic cycle is at globally. With the US expansion set to become the longest in history

this summer and the US yield curve continuing to flatten, it is clear to us that we are late cycle. In

addition, the increasing signs of protectionism is a negative development for a country like Ireland that

is so dependent on global trade.

IDA announcements by origin (% of total)

2012 2013 2014 2015 2016 2017 2018 2012-2018

France 2% 2% 5% 2% 0% 2% 3% 3%

Germany 8% 2% 3% 1% 1% 2% 5% 4%

Rest of Europe 1% 3% 0% 2% 8% 2% 7% 5%

RoW 8% 6% 7% 8% 9% 11% 10% 8%

UK 6% 1% 3% 1% 0% 14% 11% 4%

US 74% 85% 82% 84% 81% 69% 63% 76%

Source: IDA, Goodbody

We believe that there is still life left in the global expansion, while Ireland continues to excel as a

destination for large US tech multinationals. The dangers here relate to the concentration risk in terms of

economic activity and tax revenue (10 firms now pay 40% of Irish corporate tax revenue). As these

firms continue to grow rapidly, they are competing for talent with indigenous Irish companies, pushing

up costs in the process. The headline data thus may be hiding some underlying deterioration in Ireland’s

competitive position. In the 2000s, this deterioration only became visible when an international

downturn occurred. The challenge for policymakers in Ireland is to prevent an Irish case of “Dutch

disease” developing further, whereby a booming sector distorts and damages the competitiveness of

other sectors.

3. Full employment to push wage growth higher

2018 was yet another year of rapid employment growth and falling unemployment in Ireland. The most

recent data shows that employment grew by 3.1% yoy, with the previous peak level of 2.24m breached

in early 2018. The unemployment rate finished 2018 at 5.3%, putting it at its lowest level since 2008.

Employment growth is widespread, with 10 of the 14 sectors covered in the labour force survey seeing

expansion. Construction was the fastest growing sector of employment in Q3 (+14% yoy). Other fast-

growing sectors were administrative and support services (+13.6%) and accommodation and food

service activities (+10%). On the opposite end of the spectrum, financial, insurance and real estate

activities saw a decline (-6.6%) while agriculture, forestry and fishing also fell significantly (-5.7%). The

latter trend reflects the weakness caused by a myriad of issues in 2018, including poor yields, the low

value of sterling and the ongoing uncertainty about the impact of Brexit on the agri-food sector in

Ireland.

Employment back above previous peak…

Source: CSO

…with unemployment at c.5%

Source: CSO

0

2

4

6

8

10

12

14

16

18

%

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Page 8 04 Feb. 2019

Wage growth is already accelerating in the context of these tighter labour market conditions. In Q3

2018, wages grew by 2.8% yoy, the fastest growing in the series going back to 2008. All 14 sectors bar

one (real estate) experienced annual growth. Given the buoyancy of the ICT sector, it is little surprise

that this sector saw the fastest growth (+7.5% yoy). This is followed by the financial sector (4.3% yoy).

The tech sector is now the highest-paid sector of the Irish economy. Looking forward, we forecast

continuing wage inflation at an accelerating rate. While this has positive implications for the prospects

for consumer spending, it poses threats to Ireland’s competitive position. In the context of full

employment, high-paying jobs in the multi-nationals will have the effect of bidding up wages in other

indigenous companies. This can be described as an Irish case of “Dutch disease”, a topic we have written

about in the past.

Employment trends by sector

Source: CSO

Annual growth in weekly earnings

Source: CSO

Earnings trends by sector

Source: CSO

QoQ (seasonally-adjusted) Annual change

Employed

('000) Q3 2018 Q2 2018 Q1 2018 Q3 2018 Q2 2018 Q1 2018

Agriculture, forestry and fishing 104 -0.7% -8.4% 1.1% -5.4% -3.9% 4.9%

Industry 279 0.3% -0.7% -0.9% -1.8% -1.4% -1.0%

Construction 146 1.7% 4.2% 2.5% 14.1% 13.8% 10.0%

Wholesale and retail trade;

repair of motor vehicles and

motorcycles 300 -0.1% 0.2% -1.2% -1.1% -0.8% -0.8%

Transportation and storage 101 3.7% 2.2% 1.0% 7.6% 5.0% 3.6%

Accommodation and food

service activities 179 0.8% 3.0% 2.4% 10.1% 10.9% 5.0%

Information and

communication 123 5.6% 0.7% 0.6% 5.8% 1.0% 1.1%

Financial, insurance and real

estate activities 101 -8.3% 3.4% -0.8% -6.5% 3.2% -0.8%

Professional, scientific and

technical activities 135 -2.8% -0.1% 4.4% 2.7% 3.8% 3.5%

Administrative and support

service activities 105 2.4% 2.5% 4.4% 13.7% 10.0% 9.8%

Public administration and

defence; compulsory social

security 104 -0.2% -0.6% 1.9% 8.8% 5.7% 11.6%

Education 175 4.1% 1.8% 0.2% 5.9% 6.3% 5.9%

Human health and social work

activities 281 -1.6% 2.3% 0.1% 0.4% 2.2% 0.0%

Other NACE activities 122 4.2% -4.3% 1.2% 4.1% -0.3% 5.2%

Total 2265 0.5% 0.7% 0.8% 3.1% 3.4% 2.8%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

YoY (

4-quart

er

avera

ge)

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

Yo

y (f

our

qua

rte

r a

ve

rag

es)

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04 Feb. 2019 Page 9

4. Housing will remain policy issue No.1: Focus to move from volumes to affordability

The Goodbody BER Housebuilding Tracker estimates that 18,855 new dwellings were completed in

Ireland in 2018. This was in line with forecasts. We are leaving our forecast of 22K completions in 2019

and 25K in 2020 unchanged. Having grown fourfold since 2013, there has clearly been significant

progress in growing output, but problems remain in terms of viability, breadth of activity and

affordability.

Most new housing completions in 2018 were in the Greater Dublin Area, accounting for 60% of the total.

Housing schemes saw the largest increase in output (+45% yoy to 11,469 units), but apartment output

(+8% yoy to 2,428) was disappointingly low. We attribute this to a combination of the viability of

apartment schemes in large swathes of the country and ongoing uncertainty about planning regulations

and heights.

This uncertainty around planning and heights was removed in late-2018. As a result, we are likely to see

a substantial increase in apartment output in the years ahead. As a guide, in the twelve months to Q3

2018, permission was given for 10,095 apartments, four times the amount completed in 2018. In

addition, another 10,000 units were applied for since the start of Q4 2018.

Labour market forecasts

2013 2014 2015 2016 2017 2018 2019f 2020f

Total at work ('000,

end-year)

1,964

2,018

2,078

2,156

2,222

2,294

2,338

2,387

Employment Growth

(end-year) 4.0% 2.7% 3.0% 3.7% 3.1% 3.2% 1.9% 2.1%

Employment Growth

(Average) 3.0% 2.6% 3.5% 3.6% 2.9% 3.1% 2.7% 1.9%

Unemployment Rate

(end-year) 12.9% 10.9% 9.5% 7.6% 6.4% 5.2% 5.0% 4.5%

Wage Inflation -0.3% 0.2% 1.2% 1.3% 2.0% 2.5% 3.0% 3.3%

Source: CSO, Goodbody

Irish housing forecasts

2015 2016 2017 2018f 2019f 2020f

New dwellings

7,219

9,907

14,435

18,816

22,044

25,008

Average house price (€, end-year)

210,463

229,341

257,148

275,270

291,774

307,357

Price inflation (% YoY, end-year) 7.1% 9.0% 12.1% 7.0% 6.0% 5.3%

- Dublin (% YoY, end-year) 3.9% 6.6% 11.7% 5.0% 4.9% 4.9%

- Non-Dublin (% YoY, end-year) 10.7% 11.2% 12.7% 9.2% 6.5% 5.5%

Gross mortgage lending (€m)

4,865

5,655

7,286

8,659

10,102

11,465

Growth in gross lending 26.2% 16.2% 28.8% 18.9% 16.7% 13.5%

Net mort. lending growth (end -year) -2.7% -1.3% 0.0% 1.2% 2.3% 2.9%

Rental growth 9.7% 9.6% 6.1% 6.4% 5.0% 4.0%

Gross rental yield (end-year) 5.7% 5.7% 5.4% 5.4% 5.4% 5.3%

Source: Goodbody, CSO, BPFI, Central Bank

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Page 10 04 Feb. 2019

The increase in supply is welcome, but there also needs to be a focus on the affordability of these

homes. Using data from the Property Price Register, we have analysed the price distribution of new

supply. There has been a significant shift away from the lower end of the market in recent years.

Nationally, 62% of new houses sold were for less than €275k in 2016, but this fell to 44% in 2018. New

home sales shifted towards the 275k-425k mark, with the share moving from 25% in 2016 to 39%. In

Dublin, 31% of new homes were in the 350k-500k range, while almost one in five (19%) were sold for

greater than €500k.

In the context of the Central Bank’s loan to income limit of 3.5x, the price of new supply must respect

the income levels of potential home-buyers. The chart below illustrates the income distribution of Irish

workers in 2016, the latest data available.

Completions-v-permissions - total

Source: CSO

Completions-v-permissions - Apartments

Source: CSO

New home sales by price band - Ireland

Source: PPR, Goodbody

New home sales by price band - Dublin

Source: PPR, Goodbody

Individualized gross income distribution*

Source: Revenue

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Q4

2011

Q3

2012

Q2

2013

Q1

2014

Q4

2014

Q3

2015

Q2

2016

Q1

2017

Q4

2017

Q3

2018

Completions Permissions

Units

0

2,000

4,000

6,000

8,000

10,000

12,000

Q4

2011

Q3

2012

Q2

2013

Q1

2014

Q4

2014

Q3

2015

Q2

2016

Q1

2017

Q4

2017

Q3

2018

Completions - apartments Permissions - apartments

Units

18%11% 7%

20%

16%

12%

24%

28%

25%

16%23%

25%

9% 10%

14%

5% 5%7%

3% 3% 4%

3% 4% 5%

2016 2017 2018

>650k

575-650k

500-575k

425-500k

350-425k

275-350k

200-275k

125-200k

<125k1% 2%5% 5%

3%

23% 23%

15%

26%32%

30%

17%

14%

19%

10%7%

12%

6% 5% 7%

4% 4% 3%

8% 8% 9%

2016 2017 2018

>650k

575-650k

500-575k

425-500k

350-425k

275-350k

200-275k

125-200k

<125k

0

100

200

300

400

500

600

700

No.

of

earn

ers

Average income (Euro)

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04 Feb. 2019 Page 11

Using this data, we can calculate the maximum price that can be afforded (assuming a 10% deposit and

3.5x loan-to-income multiple) across the income distribution. To bring the analysis right up to date, we

assume wage growth in line with the national average over the past two years.

Following on from the analysis in the Q4 2018 Health Check, the chart below is made up of two

components. Firstly, it shows the share of homes sold in 2018 by price bracket. Secondly, it shows the

share of earners whose maximum house price value they can afford lie within those same boundaries.

An assumption is made that those couples are earning more than €50,000 (importantly, this accounts

for c.60% of income earners). The cost of producing new units (land, labour, government contributions,

profit, cost of financing) varies by area, but a sales price of less than €275,000 is rare in the private

market for newly built homes.

In a perfectly functioning market, where demand meets supply, we’d expect to see the share of houses

coming onto the market to be priced in the same proportions as the earner’s affordability constraints.

However, while a third of earners’ affordability falls in the less than €205k house price range, one in five

new houses for sale in 2018 were in this range. The largest proportion of houses up for sale fell in the

€205k to €287k, broadly matching demand. While the lower end of the market is under supplied, too

many properties coming on stream are in the higher price brackets. Given that macroprudential rules

remain unchanged in 2019, the mismatch in Irish housing will not be solved through credit loosening but

from a shift towards more affordable homes.

Houses for sale need to shift to lower end to meet affordability constraints

Source: Revenue, Goodbody

0%

5%

10%

15%

20%

25%

30%

35%

2018 share of houses % of earners who can afford the house in the range

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Page 12 04 Feb. 2019

5. The beginning of releveraging for Irish households

After a decade of deleveraging, Irish households are expected to commence a period of releveraging in

2019. Indeed, this period may have already commenced at the end of 2018. In nominal terms total

household loans have fallen a third from a peak of €204bn to an estimated current level of €138bn. As a

percentage of disposable income, household debt has fallen from a peak of 213% in 2009 to its current

level of 126%. Given that we expect disposable income to grow in excess of loans, we are forecasting

that the ratio will fall to 120% by the end of 2020.

Mortgages are the biggest component of household debt in Ireland, driving the boom and bust in the

past fifteen years. In the table below, we update our forecasts for mortgage lending up to 2021,

incorporating data for 2018 that has just been published. Based on private completions growing to

24,000 units, we believe this will increase the turnover rate in the second-hand market, leading to a new

lending market for transactions of €11.2bn (from €7.3bn in 2018). Additional lending for top-ups and

remortgaging of €2.5bn leads to a mortgage market of €13.7bn for 2021, representing potential growth

of c.60% over the next three years.

Irish household debt/disposable income

Source: Central Bank, CSO, Goodbody

100%

120%

140%

160%

180%

200%

220%

% o

f dis

p.

incom

e

Household debt explosion

Deleveraging journey

Household debt amounted to 128% of

disposable income in Q2 2018; ratio will continue to fall despite a rise in nominal debt

Projection

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04 Feb. 2019 Page 13

Irish mortgage lending forecasts

2018 2021

New homes

Private completions 16,816 24,000

Mortgages (no.) 9,333 14,400

Av. Loan (€'000) 251 291

New lending (€m) 2,340 4,188

Second-hand homes

Transactions 44,521 50,828

Turnover 2.3% 2.5%

Cash (%) 54% 45%

Mortgages (no.) 22,790 27,955

Av. Loan (€'000) 216 250

New lending (€m) 4,918 6,998

Total lending (transactions) 7,258 11,187

Top-ups

Mortgages (no.) 2,703 3,615

Av. Loan (€'000) 81,652 93,347

New lending (€m) 221 337

Remortgaging

Mortgages (no.) 5,377 8,442

% of total mortgages 0.6% 1.0%

Av. Loan (€'000) 230,882 260,907

New lending (€m) 1,241 2,203

Total lending 8,720 13,727

Source: BPFI, DCLG, Central Bank, Goodbody

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Page 14 04 Feb. 2019

6. Rising inflation presents a threat to competitiveness

Despite having the fastest growing economy for the past five years, inflation has been the lowest in the

euro area. Since 2013, consumer price inflation has remained below 1%, marking one of the longest

periods of subdued price growth since the 1920s. Recently, wage growth has picked up and with

unemployment set to fall below 5% this year, we expect to see domestic price pressures build up over

the coming twelve months.

Goods and services prices have been moving in opposite directions over recent years, reflecting the

influence of external factors in Ireland’s CPI basket. Services price growth has outstripped goods

inflation every year since 2012, with the latter seeing price declines for six consecutive years.

Given that the UK is one of the biggest sources of imports (especially in goods), sterling plays an

important role in goods price trends in Ireland. The depreciation in sterling over recent years has

depressed prices. Indeed, the Central Bank estimates that it has knocked c.1% off the annual rate of CPI

over recent years. Assuming an orderly Brexit, sterling may reverse some of its fall or at least stabilise.

Either way, the downward influence from ongoing depreciation of sterling is unlikely to be a feature

going forward. Wage growth is expected to put upward pressure on prices in the non-traded sectors of

the economy.

This upward price pressure presents risks to Ireland’s competitiveness. As one of the most open

economies in the world, it is vital that Ireland maintains its price competitiveness relative to other

countries.

There are already signs that Ireland is losing competitiveness. Ireland was ranked as the 12th most

competitive economy in 2018 by the IMD, down from 6th in 2017. With rising wage costs, growing

infrastructural bottlenecks and increasing skills shortages, this trend may continue over the coming

years. From a productivity point of view, Ireland ranks relatively well but this is skewed by hyper-

productive large multinational firms. Policy focus should be on trying to close the gap between these

firms and indigenous industry.

Low inflation coming to an end?

Source: CSO

Five-year inflation rates since 1920s

Source: CSO

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

Industrial wage inflation CPI Goods inflation Services inflation

Yoy %

Forecast

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

5-y

r change

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04 Feb. 2019 Page 15

7. Upward pressure on public spending to continue

Ireland achieved a general government surplus in 2018 for the first time since 2007, two years ahead of

target. Having hit a record high deficit of 32% of GDP in 2010, this has been a long and painful journey.

While this headline turnaround is impressive, there are significant upward pressures on public spending

evident.

As shown in the chart below, government spending is expected to be 11% higher in 2019 than was

forecasted three years ago in Budget 2016. Excluding interest costs, where estimates have fallen further

over recent years due to ongoing low interest rates, spending is forecast to be 14% (€10bn) higher this

year than was expected three years ago. Intermediate consumption (day to day spending) has seen the

largest change (+31%, €3bn), while the pay and pensions is 10% higher than was anticipated in Budget

2016.

There has also been a very substantial increase in capital spending sanctioned over this time period; in

Budget 2016, capital spending was projected to be €5bn, but is now expected to amount to €7.9bn this

year. Given the cost inflation in the construction sector over recent years, the increase in nominal

spending will not result in a commensurate increase in the volume of activity. The recent news that the

National Children’s Hospital will cost three times its original estimate is a testament to this.

Ireland’s global competitiveness rankings

Source: IMD, WEF

Budget deficit* as % of GDP

Source: DoF, CSO, Goodbody *excluding bank costs

12

23

5

10

15

20

25

30

Ireland IMD Ranking Ireland WEF

Less C

om

peti

tive

Ra

nkin

gM

ore

Com

peti

tive

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

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Page 16 04 Feb. 2019

While there are issues in relation to the management of large infrastructure projects in Ireland, the

preference is to put unexpected windfalls towards this source, rather than to current spending. As

illustrated in the 2000s (and shown in the chart below), an economic downturn can result in a significant

increase in the deficit which requires pro-cyclical policies to be introduced. Ultimately, it is capital

spending that normally takes the brunt of this adjustment.

Ireland needs to learn from the mistakes of the past by moving to a surplus over the coming years

(assuming a benign Brexit outcome). With pressures on both capital and current spending likely to

continue in 2019 and beyond, this may prove to be a bridge too far politically.

Change in 2019 revenue forecasts*

Source: Goodbody, *From Budget 2016 to Budget 2019

Change in 2019 expenditure forecasts*

Source: Goodbody, *From Budget 2016 to Budget 2019

Current expenditure hard to cut in downturn

Source: DoF, DPER

Sources of overspending in 2018

Source: DoF

Output gap versus change in fiscal stance since 2001

Source: CSO, SPU 2018, IFAC, Seamus Coffey

-2.0 0.0 2.0 4.0 6.0 8.0

Total Revenue

Taxes on Income, Wealth

Social contributions

Other

Tax on prod. & Imports

Capital taxes

Property Income

Euro (bn)

-4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0

Total spending

Inter. consumption

Capital Investment

Compensation

Social payments

Capital Transfers

Other

Subsidies

Interest

Eur (bn)

20

25

30

35

40

45

50

55

60

65

3

4

5

6

7

8

9

10

Curr

ent

Expenditure

(€bn)

Capital Expenditure

(€bn)

Capital (LHS) Current (RHS)

Current

84%

Capital

16%

-6

-4

-2

0

2

4

6

-6 -4 -2 0 2 4 6 8

Output gap (-)

Change in SPB (+)Output gap (+)

Change in SPB (+)

Output gap (-)

Change in SPB (-)Output gap (+)

Change in SPB (-)

Change

in s

tructu

ral pri

mary

Output gap, % potential GDP

20122011

2013 20102014

2015

2016

20092017 2018

2019

2020 2021

2003

2004 2006

2005

2002

2007

2001

2008

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04 Feb. 2019 Page 17

8. Focus on corporation tax will continue

Corporation tax has become a more important component of government revenue in recent years. In

2018, corporation tax receipts grew by 27% yoy to €10.4bn, accounting for 15% of total revenues. This

is up from 8% of total revenue in the 2009-2014 period. Multinationals have driven the growth, but it

does pose the question of whether Ireland is overly reliant on a concentrated and volatile revenue

source.

The chart below shows how Ireland compares with the rest of the EU. Using 2017 data for the rest of the

EU, the corporation tax share of 15% is the second highest in the EU behind Cyprus. This compares to

an EU average of 7%.

One would expect that Ireland, being a small, open economy that has a policy of attracting FDI for

selling into the EU market and beyond, would have large corporate tax revenues. However, this revenue

source has become increasingly concentrated over recent years, becoming dependent on a relatively

small number of multinationals. Multinationals now account for 80% of corporate tax receipts, with

c.40% of all CT receipts coming from just 10 firms.

Looking to 2019, focus on Ireland’s corporate tax regime is likely to continue for several reasons:

• US corporate tax reform: Although the new US tax laws were introduced at the beginning

of 2018, there are still several elements of it feeding through. Thus far, the reforms have

had very little effect on flows of FDI into Ireland.

• EU tax reforms: Some EU member states continue to push for reforms of tax laws in

Europe, including the implementation of a digital tax and changes to the way in which tax

laws are implemented at an EU level (plan to scrap national vetoes). We believe both have

little chance of getting through but are likely to remain in the public domain as potential

issues.

• OECD BEPS reforms: Ireland has fully engaged with the global efforts in the Base Erosion

and Profit Shifting (BEPS) initiative by the OECD. It is due to implement its plan for the

digital industry in 2020, introducing global rules on the calculation of the tax base.

Depending on its conclusions, it could have a large impact on Ireland’s corporate tax

revenue.

• High profile tax cases: Some of the largest companies in the world (Apple, Perrigo) are

currently involved in high-profile tax cases with Ireland and the EU.

Ireland’s total revenue heavily reliant on corporate tax receipts

Source: Eurostat, *2018

7%

15%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

% o

f to

tal re

venue

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Page 18 04 Feb. 2019

9. Office cycle hits its peak

Cycles in the office sector in Ireland are notoriously volatile and have followed a familiar pattern. In an

economic upturn, rents are pushed up, increasing the incentive for development. Given the development

lags involved, there is a certain speculative element usually involved with this activity. As the chart

below shows, it is this lag that causes problems as demand for offices may not be as strong at

completion stage as it was when the project was initially conceived.

The most recent cycle has been somewhat different, with a very significant lag between the peak in

rental growth and the completion of new supply of sufficient scale. Indeed, relative to previous cycles,

the scale of new stock (relative to the existing stock) is relatively low. We estimate that gross supply will

amount to 30% of the stock in the 2012-2020 period, compared to 51% in the 2000s cycle and 98% in

the 1990s cycle. The more conservative funding environment has played a major role in this trend.

There has, however, been a significant increase in supply in 2017 and 2018 (c.180K sqm per annum).

Rents meanwhile look to have topped out and are likely to stagnate in 2019. Demand remains strong,

but we are coming close to the end of the economic cycle globally. A period of modest falls in rents is

likely beyond 2019 in conjunction with this softer global picture. Unlike previous cycles, we do not

expect a sharp reduction, with potential Brexit-related office demand to boost demand in the short-term.

Office cycles – This time was different

Source: MSCI, Lisney, CBRE, Goodbody

Office rents & capital values to stagnate

Source: MSCI

0

2

4

6

8

10

12

14

16

18

20-30

-20

-10

0

10

20

30

40

Office rental growth (LHS) Completions/stock (RHS, Inverted)Source: IPD, Lisney, Goodbody

Peak rental

growth=1989

Peak rental

growth=2000

Peak rental

growth=2007

Supply peak=1991

Supply peak=2001

Supply

peak=2008

Peak rental

growth=2014

Supply

peak?

0

20

40

60

80

100

120

140

160

180

200

Capital value Rental Value

Index

1999=

100

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04 Feb. 2019 Page 19

10. Politics – another year of a stable minority

Given the volatility of politics globally, one would be forgiven for forgetting that Ireland has at the helm

a relatively unstable minority government. This arrangement, which began in June 2017 when 50 Fine

Gael and 7 Independent TDs agreed a “Confidence and Supply” arrangement with Fianna Fáil, has had a

few scares but has managed to exceed the expectations of many (including ourselves) in terms of its

longevity.

In December, Fianna Fáil offered an extension to the confidence and supply arrangement with the Fine

Gael up to Spring 2020. The decision was mainly due to the ongoing concerns about the Brexit

negotiations. The cooperation is welcome in the national interest and contrasts with the absence of

cooperation between (and within) the opposition parties in the UK.

Polls show that there has not been a dramatic change in support for the various political factions since

the general election in 2016. Fine Gael has seen the most significant increase (up seven points to 33%).

Independents have seen a fall in support of four percentage points but remain the second largest

grouping in the Dáil at 25%. While the Brexit process will have a large role to play, there is no great

incentive at the current time for any of the relevant parties to push for a general election. We can expect

scares through the year for various reasons, but we now believe that the current government make-up

will survive another year.

Political support since GE 2016

Source: RedC

Current support levels

Source: Irish Times/mrbi

0

5

10

15

20

25

30

35

40

Fine Gael Labour Fianna Fáil Sinn Fein Other

% o

f Tota

l

33

25

22

14

6

Fianna Fáil

25%

Fine Gael

33%

Labour

4%

Sinn Féin

24%

Independents/Other

14%

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Page 20 04 Feb. 2019

Analyst Certification

The named Research Analyst certifies that: (1) All of the views expressed in this research report accurately reflect my personal views about

any and all of the subject securities and issuers. (2) No part of my remuneration was, is, or will be, directly or indirectly, related to the

specific recommendations or views expressed by me in this report.

Regulatory Information

Goodbody Stockbrokers UC, trading as “Goodbody”, is regulated by the Central Bank of Ireland. In the UK, Goodbody is authorised and

subject to limited regulation by the Financial Conduct Authority. Goodbody is a member of the Irish Stock Exchange and the London Stock

Exchange. Goodbody is a member of the FEXCO group of companies. This publication has been approved by Goodbody. The information has

been taken from sources we believe to be reliable, we do not guarantee their accuracy or completeness and any such information may be

incomplete or condensed. All opinions and estimates constitute best judgement at the time of publication and are subject to change without

notice. The information, tools and material presented in this document are provided to you for information purposes only and are not to be

used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities.

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research business. Goodbody analysts and other staff who are involved in the preparation and dissemination of research operate and have a

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Other disclosures

A description of this company is available at Company Descriptions All prices used in this report are as at close of business of the previous working day unless otherwise indicated. A summary of our standard valuation methods are available at Valuation Methodologies A summary of share price recommendations and whether material investment banking services have been provided to these companies is available at Regulatory Disclosures Other important disclosures are available at Regulatory Disclosures Goodbody updates its recommendations on a regular basis. A breakdown of all recommendations provided by Goodbody is available at Regulatory Disclosures Where Goodbody has provided investment banking services to an issuer, details of the proportion of buys, holds and sells attributed to that issuer will also be included. This is updated on a quarterly basis. Recommendation Definitions Goodbody uses the terms “Buy”, “Sell” and “Hold. The term “Buy” means that the analyst expects the security to appreciate in excess of 10% over a twelve month period. The term “Sell” means that the security is expected to decline in excess of 10% over the next twelve months. The term “Hold” means that the analyst expects the security to neither appreciate more than 10%, or depreciate more than 10% over the next twelve months. On 26th November, 2012, the terms “Add” and “Reduce” were removed from the Recommendation Definitions and both were replaced with the “Hold” recommendation. Any Previous Recommendation that refers to either an “Add” means that the analyst expected the security to appreciate by up to 15% over a twelve month period. Any Previous Recommendation to “Reduce” means that the analyst expected the security to decline by up to 15% over the next twelve months. In the event that a stock is delisted the firm will automatically cease coverage. If however the firm ceases to cover a stock for any other reason the firm will disclose this fact. Distribution of research to clients of Goodbody Securities Inc (GSI) in the US GSI distributes third-party research produced by its affiliate, Goodbody GSI is a member of FINRA and SIPC GSI does not act as a market-maker.

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This information was current as of the last business day of the month preceding the date of the report. An affiliate of GSI may have acted, in the past 12 months, as lead manager/co-lead manager of a publicly disclosed offer of the securities in this company. Investors should be aware that an affiliate of GSI may have provided investment banking or non-investment-banking services to, and received compensation from this company in the past 12 months or may provide such services in the next three months. The term investment banking services includes acting as broker as well as the provision of corporate finance services, such as underwriting and managing or advising on a public offer. All transactions by US persons involving securities of companies discussed in this report are to be effected through GSI. Disclaimer While all reasonable care has been taken in the production and dissemination of this report it is not to be relied upon in substitution for the exercise of independent judgement. Nothing in this report constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you. Private customers having access, should not act upon it in anyway but should consult with their independent professional advisors. The price, value and income of certain investments may rise or may be subject to sudden and large falls in value. You may not recover the total amount originally invested. Past performance should not be taken as an indication or guarantee of future performance; neither should simulated performance. The value of securities may be subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities. All material presented in this report, unless specifically indicated otherwise is copyright to Goodbody. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of Goodbody.

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