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Did we catastrophise Brexit?

Four years on from UK’s official departure from the EU, the Irish economy is relatively untrammelled by the new arrangements

Boris Johnson and Leo Varadkar: the then UK prime minister and then taoiseach were key figures in the Brexit negotiations. File photograph: Noel Mullen/AFP via Getty Images

Eoin Burke-Kennedy's face
Eoin Burke-Kennedy
Sun Apr 14 2024 - 12:30

Of all the calamities forecast to befall Ireland but that never did, Brexit must rank top.

It certainly beats the Y2K fiasco of 1999 which had a much shorter lead-in period and disappeared almost on the stroke of midnight when the technical Armageddon predicted in some quarters morphed into a manageable computer glitch.

For the four years between 2016, when UK voted to leave the EU, and the country’s formal exit in 2020, the implications of our nearest neighbour and biggest EU trading partner exiting the bloc approached us like an asteroid.

Warnings about the potential loss of trade and the threat to the peace process saturated the media cycle. At one point, it was predicted that Ireland might suffer greater economic harm than the UK itself.

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We became au fait with the intricacies of a customs union. We analysed the ramifications of a hard and soft Brexit in exhaustive detail. In the months before the UK’s official exit in 2020, the government set up a Brexit contingency fund, companies stockpiled goods, citizens braced themselves for a recession.

In the end the whole affair, from Ireland’s perspective, didn’t exactly blow over but it was absorbed without the disruption and economic fallout that many had predicted.

Irish exports, long seen as the first line of defence, rose by 9.5 per cent in 2020 and by 14 per cent in both 2021 and 2022, reflecting increased activity in the State’s big pharma and IT industries, both of which prospered during the pandemic.

But even food and drink exports, which are heavily reliant on the UK market, fell by only 2 per cent in 2020 (largely on account of pandemic-related closures to food service businesses abroad) before rising by 4 per cent in 2021 and by a significant 22 per cent in 2022. Exports (including food exports) fell last year but for reasons other than Brexit.

Of course, there are problems ahead for food exporters here. UK border controls on agricultural imports from the EU (including Ireland) are due to be implemented at the end of the month and could prove a significant obstacle. According to the European Commission, the physical checks, health certificates and identification protocols on goods entering the UK, if fully enacted, will represent a 10 per cent tariff-equivalent increase for EU companies.

Brexit has also forced many businesses to ship goods to Europe along different supply routes. “A lot of the existing transport and logistics costs have been carried in margins,” says Ibec’s chief economist Ger Brady. “That might not carry through in the long run but if it does, this leaves less for investment in growing exporting sectors,” he says.

Notwithstanding these problems, the great Brext train wreck forecast to engulf Ireland never transpired. It morphed into a sort of manageable headache. Perhaps historians will see Brexit as final confirmation that the Republic has shaken off its economic dependence on Britain. Not that Britain isn’t important – just that the Irish economy, in terms of its export markets, is more diversified.

Two key flashpoints that could have caused big problems were avoided – one at the outset, the other by an unexpectedly consistent and unified EU position throughout the process.

At the start of negotiations any change to the Common Travel Area (CTA), the arrangement between the UK and Ireland that allows citizens move freely to live, work and study, was ruled out.

The UK and Irish governments signed a memorandum of understanding (MoU) in 2019 reaffirming their commitment to maintaining “the CTA, and the associated rights and privileges, in all circumstances”, including in the case of a no-deal Brexit.

[ Is Brexit the apocalypse? ]

Many view Dublin’s International Financial Services Centre as an offshoot of London’s bigger financial centre, created and facilitated by friction-free travel between Dublin and London. “The CTA creates a virtual single market for the professional skills underpinning international financial services,” one insider said. A big divergence in immigration policy between the Republic and the UK could yet strain the operation of the CTA but for now it has been unaffected.

The continued operation of the CTA also facilitated the operation of Europe’s busiest air route and a vital artery for the Irish economy: Dublin-London.

The other big potential trap was the Border. Dublin has always suspected London of being not fully cognisant or of not caring about Irish issues, and Brexiteer guff about high-tech, unseen borders seemed to underscore this.

Despite suggestions that the EU’s unified stance would fracture (it struggled to reach common positions during the financial crisis and in reaction to immigration) or that Ireland’s controversial tax position would somehow get in the way, the Irish government and the EU’s position that there could be no reversion to border infrastructure on the island held firm.

Former taoiseach Leo Varadkar and former minister for foreign affairs Simon Coveney can take significant credit that both these potential pitfalls were avoided. They spent several years making it clear to EU leaders how critical the Border was to any agreement and how critical the Belfast Agreement was to maintaining peace.

For the Republic, Brexit is now a secondary issue.

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