Dáil Éireann Debate, Thursday - 7 November 2019
53. Deputy Lisa Chambers asked the Minister for Finance the latest data available for the impact that a hard Brexit, in particular a customs border between east and west, will have on Ireland; and if he will make a statement on the matter. [45876/19]
View answerIt has always been clear from the published studies, including those by my Department, that Brexit, in whatever form it takes, will have a negative impact on our economy and our living standards, and that this impact is significantly greater in the ‘No-Deal’ Brexit scenario.
Budget 2020, including the macroeconomic and fiscal outlook which underpins it, was based on the prudent assumption that the UK would leave the EU on 31 October without an agreement. The Withdrawal Agreement endorsed by the European Council, will now require ratification by the European Parliament and the UK Parliament. Pending ratification of the deal, it is not possible to say if the outlook will be different to that set out in Budget 2020. The extension to the Brexit deadline, agreed on 28 October, means that there is likely to be some upside to the projections in Budget 2020.
The Macroeconomic Outlook and Projections published with Budget 2020 show that, compared to a no Brexit baseline, the level of GDP in Ireland 5 years after Brexit would be around 3.8 per cent lower in a no-deal Brexit scenario. Employment would be 2.1 per cent lower in a no-deal scenario, than would otherwise be the case. It is important to highlight that employment and output in Ireland are still forecast to continue growing – but at a slower pace than previously projected.
Trade is the main channel through which a disorderly UK exit would impact the Irish economy, with tariff and non-tariff barriers weighing on exports. A disorderly exit would also result in lower activity in the UK and elsewhere, further reducing the demand for Irish exports. The impact in the more traditional manufacturing sectors could be severe, especially if tariff and non-tariff measures on their UK-sourced intermediate inputs led to production shortages. In aggregate terms, export growth of less than one per cent is expected next year, a sharp slowdown from the projected 2019 outturn of around 10 per cent.
In 2017 my Department published a paper on trade exposures which shows that relative to other EU Member States, Irish exports are substantially more exposed to the UK in a number of goods sectors. The analysis reveals that eleven of the EU-27’s top fifteen proportionally most exposed products to the UK are Irish exports. The top five most exposed sectors included the Irish Agri-food sub-sectors Cereals, Vegetables and Fruit, and Live Animal products. In services, Ireland is in the upper range of the most exposed EU Member States, particularly in Financial Services.
Since the referendum result in 2016, Brexit has been embedded in all of the Government’s economic decision-making, and in the management of our economy. The Government will continue to work to strengthen the resilience of the economy, to maximise opportunities and to prepare our economy for the challenges of Brexit, including through the Ireland Connected Trade and Investment Strategy, the 10-year National Development Plan and Future Jobs Ireland.
Maintaining the closest possible trading relationship between the EU and the UK is therefore one of the Government’s key Brexit priorities. The Government will continue to work to improve the business environment – to make it more competitive, to assist exporters to diversify markets, and to provide better infrastructure.
