Joan Burton
Question:15. Deputy Joan Burton asked the Minister for Finance his assessment of the likely impact on the economy of a hard Brexit in March 2019; and if he will make a statement on the matter. [43974/18]
View answerThursday, 25 October 2018
Questions (15)
Written answers
My Department’s budget forecasts assume, as a central scenario, that the UK will make an ‘orderly’ exit from the EU. This involves a transition period being agreed until the end of 2020, and a free trade agreement being agreed thereafter.
However, I am conscious that the nature of the UK’s exit remains uncertain, and that the risks of a harder Brexit have increased. An assessment of the potential outcomes is included in the Economic and Fiscal Outlook that accompanied Budget 2019 .
In the short-term, a no-deal hard Brexit would have a material impact on Ireland, which would be asymmetric relative to the rest of the EU. The resulting shock would likely lead to market volatility, further sterling depreciation, and disruption to trade with the UK. This would have negative impacts for consumer spending, investment and competitiveness, with potential spillovers to the labour market and public finances. Sectors with strong export ties to the UK, such as agri-food and parts of manufacturing (especially indigenous manufacturing), would be especially exposed, in particular at the regional level.
With regard to the long term impact, joint research by my Department and the ESRI published in 2016 shows that the potential impact of a hard Brexit is significant. The level of GDP would be almost 4 per cent below what it otherwise would have been in a no-Brexit scenario, after ten years. The level of employment in Ireland would be 2 per cent lower, with the unemployment rate nearly 2 percentage points higher.
It is important to stress that the economic models may not fully capture the full impact, given the difficulty in modelling financial market effects, non-tariff barriers and other factors. Therefore, these quantitative effects should be seen as a minimum as opposed to a maximum impact.
The Government is working hard with the EU Taskforce and our EU partners to ensure that an agreement between the EU and the UK is reached. While it is still Government’s view that a ‘no deal’ outcome remains unlikely, we are planning for all scenarios. Budget 2019 continues the process of ensuring that Ireland is in the best possible position to respond to the challenges that Brexit will bring.