Wednesday, 8 May 2019

Questions (558)

Joan Burton


558. Deputy Joan Burton asked the Minister for Business, Enterprise and Innovation her plans to produce a macroeconomic assessment of the impact of Brexit on the all-island economy (details supplied); and if she will make a statement on the matter. [18625/19]

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Written answers (Question to Business)

My Department is keenly aware of the impacts Brexit may have on the economies of Ireland and Northern Ireland, though the macroeconomic impacts for both and jointly would depend to a great extent on the type of Brexit that ultimately emerges. I can point to the range of informative research that my Department and its agencies have undertaken to inform how we best understand the impacts of Brexit and support enterprises that are likely to face particular challenges.

Over the past two years, my Department has provided funding to InterTradeIreland (ITI) for a series of research reports undertaken by the ESRI on behalf of ITI. This research assessed the potential implications of Brexit for cross-border trade in four research stages. The first research report examined cross border trading patterns and the potential impacts on overall trade of the application of EU WTO tariffs, including the impact of Non-Tariff Barriers and changes to the euro-sterling exchange rate. The second report examined the patterns of cross-border trade on the island of Ireland, focusing on the role of supply chain links. This report showed that for over half (51%) of Irish exporters, Northern Ireland is the destination for more than 50% of their exports, while for just over 25% of Irish firms, Northern Ireland is the destination for more than 95% of their exports. It showed that Northern Ireland accounts for between 10-12% of total exports from Ireland to the UK as a whole and accounted for 7-8% of imports. A third report took an in-depth look at small firms participating in cross-border exporting; export performance; and determinants of export destinations for firms across the island of Ireland. Finally, a fourth report examined the capacity of firms to absorb shocks using detailed firm-level patterns of risk exposure across Ireland and Northern Ireland, providing insight into how dispersed across firms a post-Brexit shock to trade costs could be. This research has been made publicly available.

InterTradeIreland also produce a comprehensive quarterly all-island survey, the All-Island Business Monitor, which tracks economic indicators such as business position, sales employment and other topical issues. The latest Business Monitor (Quarter 4, 2018) highlights the impact the uncertainty caused by Brexit is having on small and medium businesses, and particularly those engaged in cross-border trade. This research has helped ITI and my Department to better understand the potential impact of Brexit on firms across the island, especially those involved in cross-border trade, and informs our Brexit related work. The Government, through my Department, has provided an additional €1 million in funding for 2019 to support this work, and will continue to liaise closely with the body to ensure it has the support it needs to support businesses at this time.

In addition, my Department has undertaken extensive research to assess Brexit's potential implications for business, conducting a qualitative assessment on “The firm-level impact of Brexit on Most Exposed Sectors”, published in June 2018. The research, conducted jointly with Deloitte, engaged with firms, including some operating on an all-island basis, representing large, medium and small employers to get their insights on what would be their principal concerns if they were to be faced with a ‘hard’ Brexit scenario. The findings indicate that the greatest level of concern relates to the free movement of goods, the re-emergence of a hard border and the possible imposition of tariffs on trade. The study highlighted that a no-deal Brexit would have serious implications across many aspects of a firm’s operations.

My Department also previously commissioned research to model the implications of Brexit for the Irish economy and trade. This independent study undertaken by Copenhagen Economics on behalf of the Department, quantifies the impact of possible new barriers to trade which might emerge as a result of Brexit. The study considered a range of possible Brexit scenarios in order to determine the possible impact of Brexit on Ireland’s trade performance (i.e. imports and exports), and ultimately on Irish GDP. The study examined the impacts on the Republic of Ireland only. All of the scenarios considered produce a result that is less favourable for Ireland than a non-Brexit scenario. Nevertheless, regardless of the scenario, the Irish economy is still expected to record strong, positive growth out to 2030 – Brexit has a dampening impact, however, resulting in a lower growth rate than would otherwise have occurred

The study analysed the impact of these scenarios across 24 sectors of the Irish economy. The impact of Brexit in five sectors was found to account for approximately 90 per cent of the total economic impact, these were Agri-Food; Pharma-Chemicals; Wholesale & Retail; Electrical Machinery; and Air Transport.

The economies of Ireland and Northern Ireland are closely connected. An open border has allowed industries of all types to develop in both jurisdictions without constraints. I have had the privilege on a number of occasions to meet with enterprises that operate smoothly and successfully on an all-Ireland basis. We know how important the ease of this cross border trade is to enterprises based here in Ireland, and you are well aware of Ireland's negotiating position in this regard.

My Department has focused on undertaking research and engagement with firms that ensures we continue to provide the supports required by Irish based enterprises as they navigate the uncertainties and challenges posed by Brexit.