If UK votes for Brexit, the only certainty is the negative impact of uncertainty

Best to ignore most of the forecasts of what will happen after Brexit. We have been deluged with predictions of how much UK gross domestic product will fall, what percentage sterling might lose on the markets, the implications for interest rates and on and on.

Economic forecasting always requires a considerable leap of faith, but in the case of Brexit it is a jump too far. Such are the uncertainties surrounding the whole affair that the only thing we can safely say is it that it would probably be a horrible mess, for a while anyway, and beyond that, who knows?

That said, it is almost impossible to make an economic case in favour of Brexit. The UK’s access to major markets would be hit, inward investment would be severely hurt and huge uncertainty would put a host of business decisions on hold.

The UK treasury’s estimate that it would cost every household £4,300 (€3,800) a year on average over the next decade and a half is an exercise in useless precision – nobody has a clue about the real number. But the fact that Brexit would hurt the UK economy – and by extension Ireland’s – is hard to dispute. And the biggest cost, in the first period at least, is the one that few have focused on: the cost of uncertainty.

Upheaval

In the event of a Leave vote we would wake up next Friday morning with nothing having changed, but everything having changed. Britain would still be in the European Union and the single market, trading rules would be exactly as they were and everyone could continue to go about their business, though of course they may well have to deal with considerable upheaval on the financial markets.

But behind this apparent normality would be massive uncertainty, affecting not just Britain but Ireland, Europe and beyond. In theory, Britain would notify the EU at some early stage of its intention to leave and would negotiate the terms within the next two years.

In practice, nobody has a clue. The notification may or may not come in the short term. If it did, nobody believes it would be done in two years – and the new trading arrangements would be negotiated separately anyway. You can game plan this 100 ways, but the only sure thing is that nobody knows, and without knowing you can’t put numbers on the consequences with any confience.

In passing you can see how this uncertainty about what will happen has played into an appalling campaign. The Remain side has exaggerated and pushed the fear factor way beyond what is reasonable in terms of pretending it can all be reduced to numbers and cuts. The Leave side has just plain lied, on everything from the economy to immigration, and on the latter subject in particular the campaign took on almost sinister tones.

Politics these days has moved beyond the era of trying to put forward a rational argument to a belief that the public will be persuaded only by stark and extreme threats – and that how these are presented is fair game.

The Brexit campaign, and the focus on what happens if Britain leaves, has meant the debate has bypassed the price of uncertainty that will be paid while this is all worked out. And given that the earliest likely date of British exit would be 2019, this is no trivial matter – in fact, it goes to the very heart of the price that would be paid for a Leave vote.

Senior Irish officials say privately that Ireland is as ready as it could be for Brexit, but that advance planning has very limited value when you have little idea what you are getting ready for.

The Central Bank has asked the banks to be ready, the National Treasury Management Agency has raised most of the cash it needs this year, and officials and businesses are fretting about a possible fall in sterling’s value against the euro and its impact on exporters. But even here, looking at the currency markets, beyond a feeling the UK currency could face an initial hit, nobody really knows what the trend will be in the months after Brexit.

It is impossible to put any numbers on the impact of the prolonged period of uncertainty, but it would surely be significant. We would not know the future terms of trade with a key trading partner. New bureaucracy and tariffs may face those exporting and importing food in the years to come, for example. But nobody knows – and they wouldn’t know for a few years.

Questions would be asked in the markets about whether Ireland might follow Britain out of the EU. The Government would dismiss this. But bond investors looking to tie up money for 10 years or more or major multinationals planning where to invest have very long time horizons. Ireland may gain from projects that would have gone to the UK, or we may lose other investments. We have no idea whether we would have to establish controls on the Border or tighter controls on people entering or leaving the island of Ireland. Or both. Or neither.

The one thing we can say is that uncertainty causes delay. It means investors sit and wait. It means businesses put plans on hold. This leads to consumers doing the same. The world is always full of uncertainties, but Brexit adds another big one. Life must go on, of course, and it will. But the paralysing impact of waking up next Friday to a Leave vote should not be underestimated.