Project Pricey: 16 ways a hard Brexit would hit Irish pockets
The effects of the UK leaving the EU without a deal would have serious consequences here
In a bordered world, you would only be able to carry in goods to the value of €430, as you would be coming from outside the EU. Photograph: Charles McQuillan/Getty Images
We have just six months left. That means there are just 180 days or so to sort Brexit out in a fashion that doesn’t catapult us all into a pit of economic despair, and things are not looking promising.
In the run-up to the referendum in June 2016, Pricewatch ran a piece whichthat focussed on how Irish consumers might be hit in the event that the British electorate jumped off the cliff. As we were writing it we were certain it was purely an academic exercise and that none of the apocalyptic predictions we were making would come to pass for the very simple reason that Brexit would not happen.
Then the results came in.
Fast-forward six months to the start of 2017, and we revisited the topic as the negotiations on the terms of an exit were starting in earnest. Things seemed a bit more gloomy then but, again, we were pretty sure the adults in the negotiating rooms in London and Brussels and Dublin would sort it all out and everything would be grand.
Last February David Davis, the then-Brexit secretary, assured us all that the UK was not going to deliver a dystopian “Mad Max-style” Brexit. However, he has long since stropped off the playing field and the Brexit we could be facing might make Mad Max look like Finding Nemo.
Time is running out, and things are looking worse than they were 18 months ago. The multiple effects the UK’s withdrawal from the EU will have on individuals in Ireland, in the UK and across the EU are starting to look increasingly likely.
The EU’s consumer policies have greatly benefited us all when establishing redress mechanisms for delayed or cancelled flights, introducing tough laws for putting chemical products on the market, applying uniform rules to withdrawing from online sales and setting high food-safety standards. A hard Brexit will cast doubt on all this and more in all our dealings with the UK, which leads us back to the question we have repeatedly asked already: what will happen if no deal is done?
1 When Michael O’Leary and other high fliers in the aviation industry spoke of the dire consequences of Brexit in the past, it sounded somewhat fanciful. It doesn’t sound like that any more. Flights between Britain and the European Union could be grounded immediately after a no-deal Brexit, according to the most recent batch of technical notices on the impact of a hard Brexit published by the British government.
“If the UK leaves the EU in March 2019 with no agreement in place, UK- and EU-licensed airlines would lose the automatic right to operate air services between the UK and the EU without seeking advance permission,” it said. While the British government would unilaterally grant European airlines permission to land at British airports and would hope the EU did the same as part of a “bare-bones” aviation agreement, there are no guarantees, and if the talks end in acrimony there could be chaos in the skies for a spell after Brexit actually happens.
2 The grounding of flights would be bad enough for Irish consumers but most of us could probably cope without flights to the UK for a spell – the ferries will still be crossing the Irish Sea. The stalling of the trucks that bring food and other goods to here from there would be much harder to deal with. The same British technical paper has suggested that road hauliers would no longer be able to rely on automatic recognition of their licences, and as a result could be banned from operating in the EU.
3 A no-deal Brexit might well hit us hardest in the pocket and could cost each Irish households an average of €1,400 a year as prices rise, according to the Economic and Social Research Institute (ESRI). That is about €3,000 before tax. These numbers have not been plucked from the air. Research published by the ESRI earlier this year looked at the consumer side of Brexit and the likely impact of trade barriers on retail prices in the Republic. It used a database of more than 4,500 products routinely imported from Britain and found that the price of bread and cereals in the Republic could rise by up to 30 per cent in a hard Brexit scenario, while milk, cheese and egg prices could increase 46 per cent. A range of products – including meat, sugar, confectionery, coffee, tea and mineral water – were likely to increase by 20-30 per cent. The overall effect of these changes would increase the average cost of living for Irish households by 2-3.1 per cent, which, in cash terms. means an annual cost of €892-€1,360 per household.
4 When planes are allowed to take off again – if they are, in fact grounded for a spell – then Irish air passengers departing the UK with a UK airline could well find their rights to redress and compensation in case of cancellations or delays significantly diminished. European legislation gives significant protection to all air passengers who are stranded, delayed or otherwise hung out to dry.
Under EU regulation 261, airlines operating in the EU must offer passengers affected by cancellations a full refund or a rerouting on the next available flight or at a later time that suits them. That is standard stuff. Crucially, however, when a passenger asks to be put on the next available flight, EU rules state that the airline must provide care and assistance until the affected passenger can be flown home. There are no exceptions to the rule. But it only applies to EU airlines. While the UK would probably introduce similar legislation for passengers using its airports, probably is not definitely.
5 Three years ago £1 would have bought you €1.45. Today it will get you €1.12. As sterling has weakened against the euro, things bought in that currency have become much cheaper – sort of. The wearingly familiar reality is that many British retailers who do business in the Republic as well have been incredibly slow at passing on any savings to us at all.
Where a weaker sterling has made a difference is in cross-Border shopping. It is significantly more attractive today than it was two years ago, and if sterling weakens more, the allure of cheaper goods in the North will widen. While such savings are to be welcomed, lower-cost imports make things tougher for Irish brands doing business here and there. And while it will be cheaper for people from this State to travel to the UK, the Republic will be considerably more expensive for British tourists. There are also significant tax implications if more shoppers from the Republic start crossing the Border in search of bargains.
6 And speaking of borders, if the UK steps outside of existing EU trading arrangements as part of a no-deal exit, that shopping trip to Belfast might become almost as problematic as one to New York, albeit a lot easier to get to. Today you can pretty much bring as much as you can physically carry in your car across the invisible border. But in a bordered world, you would only be able to carry in goods to the value of €430, as you would be coming from outside the EU. When imports go above that, customs and VAT become payable. There are separate limits relating to tobacco and alcohol – for example, you are can bring in 200 cigarettes or a litre of spirits from outside the EU. If the North stays in a single customs areas, then the cross-Border problem on this island would disappear, although customs duties might apply between the North and Britain. If the North does not have the same customs and regulatory regime as the Republic, then we have a problem.
7 That is not the only place where shopping problems might arise. A hard Brexit will mean higher costs on goods bought online from Asos, Amazon or any other retailers based in the UK. Any item that costs more than €22 and comes from outside the EU is now liable to VAT, and any item over €150 is also liable to customs, chargeable on some products – notably clothing.
8 Bringing used cars from the UK will become much dearer as purchasers will be liable for VAT at 23 per cent. This would wipe out the financial attraction for individual purchasers and for dealers buying cars in the UK to sell them on in the Republic.
9 The common travel area between the Republic and Northern Ireland and the Republic and Britain is almost certainly going to remain – that is an arrangement between us and them, after all, and requires no broader EU deal to be in place. However, it is unclear how the new arrangements will work. And in a worst-case scenario we could see a return of the hard border and more difficulties travelling to Britain.
10 Because both Irish and British citizens are part of the EU today, we are all treated equally in all sorts of ways no matter which jurisdiction we find ourselves in. So, if any Irish person has the misfortune to fall ill in the UK, they can take full advantage of the NHS. And of course, if any British citizen has the misfortune to fall ill here, they can take advantage of our wonderful system. If Britain and the EU part ways in a hard way, that will change and we could find ourselves treated as international travellers when in the UK, so we would have to pay through the nose for healthcare when there.
11 When Irish consumers buy products from UK-based traders, they have certain inalienable rights, granted to them under EU directives and rules. These could be weakened in the event of a hard Brexit. As it stands you have a “cooling-off” period of 14 calendar days, under which you do not have to give any reason to return goods and seek a full refund, among other rights. It is obviously not going to be in Britain’s interests to diminish the online shopping rights of its own citizens and it will most likely want to do some sort of deal to enshrine them in whatever comes next, but if it is not adhering to EU law and directives, then the protections we have now cannot be guaranteed.
12 One of the most readily identifiable benefits of EU membership in recent years has been the way manners were put on mobile phone companies who had spent more than a decade gouging us all. Before caps on roaming were introduced, people across the EU had to pay sky-high prices for calls, texts and data. The EU-imposed roaming caps have put a stop to that. The rule, of course, only applies when roaming with the EU. With a hard Brexit, making calls, sending texts or mindlessly scanning Facebook while doing your cross-Border shopping in Newry could end up costing a fortune.
13 A hard Brexit may well see a British exit from the single European payments area (Sepa). It has made electronic transfers across all Sepa states cheaper and faster and gave consumers greater control over their finances than ever before.
14 We import almost 90 per cent of our total energy requirements, and most of it comes in through the UK. It is a business worth about €4.6 billion each year, and difficulties in that space will almost certainly lead to higher energy costs. They could see Irish consumers paying hundreds of euro more each year to heat and light their homes. But that is not all: product prices would almost certainly climb if the energy cost base for Irish manufacturers were to rise.
15 Economists John FitzGerald and Edgar Morgenroth wrote a paper recently for the Institute of International and European Affairs (IIEA) that said that as around two-thirds of the products on our supermarket shelves are made in the UK or come through there, a no-deal Brexit could see delays impacting availability in Irish shops. Our supermarket shelves are not likely to be stripped bare, but many popular cereals and biscuits might disappear for a period. And if you’re partial to Marmite, you might want to stock up now.
16 We import large amounts of medicines and pharmaceutical products from the UK. In a post-Brexit world, the UK will leave the EU pharmaceutical regulation regime so new regulatory arrangements will be needed for UK goods sold here. There is some comfort to be drawn from the fact that the industry has been working with the Government and with regulators here and there and all sides are confident there will be no shortage of vital medicines. We live in hope.