Government warns it cannot fully plan for Brexit
Note for TDs and Senators identifies threats to trade and financial markets
Jose Angel Gurria, secretary-general of the OECD, holds up his organisation’s policy paper on the effects of Brexit during a speech at the London School of Economics on Wednesday. It became the latest international body to warn the UK that leaving the European Union would cause lasting damage to the economy. Photograph: Chris Ratcliffe/Bloomberg
The Republic cannot “fully develop” contingency plans for any UK exit from the EU as the terms of departure are unknown, the outgoing Government has warned.
In a separate development, Central Bank governor Philip Lane hinted at the provision of emergency liquidity for banks if a vote to leave the EU was followed by financial market dislocation.
The latest Dublin assessments came as former Northern Ireland secretary of state Peter Mandelson warned the North’s economy would be “negatively affected” in a Brexit scenario.
The Government’s observations, set out in a note for TDs and Senators, identified threats to trade and financial market stability if Britain votes to leave.
Further questions arose for migration, social welfare, energy markets, Northern Ireland and foreign direct investment, it said.
The note added that questions would also arise “on a much smaller scale” in the event of a British vote to remain in the EU. At issue was the impact of changes to UK welfare and child benefit arrangements on newly-arriving Irish citizens.
As the referendum campaign intensifies, the note said negotiations for at least two years would be required to agree post-Brexit arrangements.
The paper reiterated that the Government’s wants Britain to remain in the EU “for reasons relating to the economy, Northern Ireland, the effectiveness of the EU itself and the common travel area”.
Dublin was fully conscious and respectful of jurisdictional boundaries and the fact that the decision was for the UK itself, the note said.
It said efforts to raise awareness and voter registration in Britain’s Irish community should be seen in context of a 63 million population.
Some 828,000 people identified themselves as “Irish only” and not all may be registered to vote. Northern Ireland represented 2.9 per cent of total UK population, Scotland 8.3 per cent, Wales 4.8 per cent and England 84 per cent.
Of the outlook for €1.2 billion in weekly trade between Ireland and Britain, the paper said much depends on the nature of post-Brexit arrangements.
“The agri-food business in particular, which has a significant UK market, would be particularly vulnerable. Many sectors trading with the UK are employment-intensive so that there may be disproportionate adverse impacts on jobs here.”
The paper noted recent fluctuations in sterling’s value and it went on to cite suggestions that a leave vote could weaken sterling by 10-15 per cent, moving closer to parity with the euro after the referendum. “This has implications, inter alia, for Irish exports to the UK and tourism.”
Range of scenarios
“Clearly, as the Bank of England already announced, it’s possible in the aftermath of that vote to the extent that there’s any dislocation in financial markets: there may need to be the typical kind of central bank intervention for liquidity reason. I think that’s fairly standard.”
Deputy governor Cyril Roux, who has command of financial regulation, said a post-Brexit situation for banks would vary by institution.
“The immediate issue for banks is to ensure that they are prepared for any market disruption, liquidity disruption.
“That’s very clear in everybody’s mind. This is very much in place . . . The rest is more adapting the business model.”