The Irish Times view on the ESRI/Department of Finance Brexit outlook
GDP would end up 5% lower over the next decade and employment would be down by 80,000
“Most exposed in a no-deal scenario would be sectors such as agri-food, with a high reliance on the UK market and facing new tariffs and other trade barriers.” Photograph: Trevor McBride
The threat posed to the economy by a no-deal Brexit is graphically set out in the latest analysis from the Economic and Social Research Institute and the Department of Finance. Because Britain’s exit from the EU is an unprecedented event with far-reaching and diverse implications, such an exercise has a significant margin for error. However, the warning that over the next decade, GDP would end up 5 per cent lower than otherwise and employment would be down by 80,000 is sobering.
So is the assessment that about half of this impact would hit the economy by the end of 2020 in the event of a chaotic no-deal exit. Negative as this is, it is worth remembering that work from the Central Bank suggested the initial hit could be even higher.
Whatever kind of Brexit emerges will be bad for the Irish economy but the impact of a negotiated exit, or one which leaves the UK with closer trading links with the EU in the long term, would be much less. As the costs in this scenario would emerge over a longer time period, they would also be more manageable. The problem with a disorderly no-deal departure is that much of the outcome would be apparent very quickly and the impact on consumer and business confidence would be inevitably negative.
The impact would vary significantly from sector to sector. Most exposed in a no-deal scenario would be sectors such as agri-food, with a high reliance on the UK market and facing new tariffs and other trade barriers. In turn this could quickly affect farmers and the wider rural economy. The beef sector faces particularly serious threats, but other areas like pigmeat and dairy would also be affected. So would many SMEs selling into the UK without the resources available to larger firms to deal with the fallout. Rural Ireland would be more exposed than major cities, though the overall initial economic repercussions would reverberate throughout the economy.
As well as economic threats, the Government would also have to address the issue of what happens at the Irish Border in the event of a no-deal exit. It says it is in negotiations with the EU on how to avoid a hard border and is arguing that the UK has obligations here, too. Difficult choices – political and otherwise – could lie ahead here, depending on how events pan out.
The economic calculus, of course, is similar for the UK in that a no-deal exit would mean much higher costs and more uncertainty. We must hope that this reality creates an impetus for the House of Commons to come to its senses. It must find a way forward, either through approval of Theresa May’s withdrawal agreement or setting some other course which would probably require a longer delay to Brexit. Only days before Brexit had been due to occur, it is extraordinary that the British political system has not yet done so.