LONDON – Despite the upheaval resulting from Ireland's recent general election, in which no party won enough seats to form a government, it's not the climate of political uncertainty that is raising concerns among domestic businesses or international investors. The biggest threat, experts say, is coming from across the Irish Sea, where a potential British exit or "Brexit" from the European Union has major economic implications for Ireland too.

International investors appear largely unconcerned by the domestic instability that has left Ireland facing the prospect of a fractious coalition, a weak minority government or another election in the coming months. Weeks after the election, the state's two largest parties — Fine Gael, the leading member of the coalition that governed the country during the last parliament, and Fianna Fail — are in talks about the possibility of forming a "grand coalition" between the rival parties, whose animosity dates back to the country's civil war almost a century ago. 

In the first quantifiable gauge of investor sentiment since the election, Ireland's National Treasury Management Agency last week sold 500 million euros ($552 million) of six-month Treasury bills at a record low interest rate of -0.22 percent – a vote of confidence in the country's economy despite the political uncertainty.

A more pressing worry among international investors, as evidenced in a note from Goldman Sachs, was the possibility of nationalist party Sinn Fein, whose economic policies are hard-left, joining a coalition government. Investors appear to have been calmed by this prospect's receding.

“The market is not very concerned about the exact nature of a combination, or indeed about how long, within reason, it will take to form the new government,” Eoin Fahy, chief economist at Kleinwort Benson Investors in Dublin, told Bloomberg. “The key issue is that the prospect of a Fianna Fail-Sinn Fein coalition now seems highly unlikely. ”

But the issue that's caused the most disquiet among Ireland's business community is the country's biggest trading partner, Britain, and the looming question of whether it will vote for a Brexit in a June referendum.

“We should probably be far more concerned about Brexit than about getting a stable government,” Eamonn McKeown, a former head of the Irish Tourism Confederation, the industry's principal lobbying group, told International Business Times.

“The issues around tourism and trade, and around the strength of sterling, which has been a huge factor in driving Irish exports to Britain and in driving British tourism to Ireland [are of concern] ... We need that referendum in Britain to happen more urgently and successfully from a business point of view than we need another general election here. It has potentially far more negative impacts,” he added.

Irish institutions have also been expressing concern about the upcoming British vote, with Allied Irish Bank, one of the country's largest and almost entirely state-owned, warning that Ireland would be “greatly impacted by a Brexit.

The reasons for Irish concern about a possible Brexit are clear-cut: Britain remains Ireland's largest export destination, purchasing 16 percent of  Ireland's total industrial exports in 2012, a position that has not changed since the inception of the euro. Similarly it is the largest recipient of Irish service exports with an 18.5 percent share, according to a PA Consulting Group report. Any change in Britain's status within the European union would complicate the business relationship between the two countries and hurt Irish companies.

“The threats are greater externally than they are from the domestic political structure. ... The real threats to Ireland come from Brexit and EU political instability,” Finbarr Murphy, a barrister and former general counsel for Bank of Ireland, told International Business Times.

Murphy also raised the specter of another external risk to Ireland: U.S. tax reform that could bring some of the $2.1 trillion held overseas by U.S. firms, a portion of which is in Ireland, back home.

“[In addition,] if you had a significant shakeup in the makeup of the [U.S.] Congress, and a sensible, from a U.S. perspective, tax restructuring which would lower the general rate of tax on businesses in the U.S. and repatriate hidden profits, that would be a much bigger threat to Ireland than anything we could do ourselves.”