Irish will be worst hit if UK leaves EU, study finds

A British exit from the EU could lead to major economic losses in Ireland, researchers at the London School of Economics have warned.

A new study finds the UK economy suffers the biggest loss in living standards in a “Brexit” scenario but that Ireland “suffers the largest proportional losses” of any country after Britain.

The study, by the Centre for Economic Performance at the LSE, follows on from earlier research which suggested the adverse Brexit impact on the UK economy could be as a great as the financial crash of 2008.

Such conclusions support Irish research findings which point to the threat of major trade and other losses in Ireland in the event the British people vote to leave the EU in the June referendum.

"We think about two cases, an optimistic case and a pessimistic case," said Thomas Sampson, an assistant professor in the LSE economics department.

“For Ireland, what we find is that the effect of Brexit on Irish incomes is a decline of 1.0 per cent in the optimistic case; and 2.4 per cent in the pessimistic case.”

Such losses would be borne as a permanent decline in Ireland’s gross domestic product, Prof Sampson said. The initial impact would be gradual.

“These are the biggest effects for any country other than the UK. The reason is, obviously, because Ireland trades a lot with the UK so the rise in trade barriers has a bigger impact.”

The LSE study examined two Brexit scenarios. In the first, Britain's relationship with the EU post-exit would be akin to that of Norway, a member of the single market.

Second scenario

In the second, the increase in trade costs was larger, as Britain would no longer participate in the single market.

The “optimistic” assessment pointed to a 1.3 per cent loss to British national income and the “pessimistic” assessment suggested a 2.6 per cent loss.

“The welfare loss is not limited to the UK. EU countries that trade intensively with the UK tend to lose more.

For example, Ireland suffers the largest losses from Brexit,” said a technical paper published alongside the LSE report.

Other countries which would face big losses include the Netherlands and Belgium.

“The fall in income per capita resulting from lower trade more than offsets any savings that the UK obtains from reduced fiscal contributions to the EU budget,” the LSE finds