ESRI warns of possible hit to Irish economy from UK travel ban

Think tank says compromised freight deliveries could have ‘contractionary impact’

The Economic and Social Research Institute (ESRI) has warned that the UK travel ban could have a negative impact on economic activity here, possibly leading to lower-than-expected growth.

In a report last week the think tank said it was expecting economic growth of 3.4 per cent this year and 4.9 per cent in 2021. However, the ESRI’s Kieran McQuinn said these forecasts had come before the recent UK travel ban, which has created chaos at ports and huge backlogs of freight deliveries.

“We hadn’t considered that in our recent commentary, however... it will almost certainly have some contractionary impact on the fourth-quarter data,” Prof McQuinn said.

“ It all depends on how long the measures are kept in place in terms of whether you would actually see it in the data. We would probably want to see these measures kept in place for two to three weeks at least before we would start revising our growth forecasts.

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“If that was the case our growth outlook would be less, our unemployment figures would be higher, and the related fiscal variables – deficit, debt to gross domestic product (GDP) – would be adversely impacted,” he said.

The ban on travel in and out of the UK, imposed by several European countries to contain a new coronavirus variant, has compromised the UK "landbridge" route to mainland Europe, which is used by hundreds of Irish businesses to get goods in and out of Europe.

Up to 250 Irish lorries stuck in England face returning home and dumping product.

Recovery

In its latest quarterly analysis of the Irish economy the institute highlighted a faster-than-expected recovery from the pandemic in the third quarter of 2020, coinciding with the easing of restrictions. However, it warned that unemployment would remain high for an extended period.

Up 240,000 people could remain jobless for another year as a result of the economic shock from Covid-19, particularly in the hospitality sector.

Nonetheless its growth outlook for the Irish economy was strong, which presumes another six-week period of strict public health measures during the first half of the new year, the widespread availability of a vaccine and a Brexit deal.

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times