My Department has been participating in whole of Government preparations for Brexit since before the UK referendum in 2016 and, in line with the Government’s overall approach, this work intensified during 2020 ahead of the end of the transition period.
The new Trade and Cooperation Agreement between the EU and UK is a positive conclusion to the transition period. However, the new agreement still represents a break from previously existing arrangements.
Effective implementation of the TCA is a priority. Ireland, as part of the EU, will play our full part in realising the full potential of TCA for citizens and businesses. The EU continues to engage intensively with the UK to find solutions to the difficulties following Brexit, including implementation of the Ireland Northern Ireland Protocol, which safeguards the Good Friday Agreement, avoids a hard border and protects the Single Market, and Ireland’s place in it.
The net impact of Brexit on the policy areas within my remit is negative. The principal negative impact arises from the trade shock, which represents a permanent shock to the Irish economy, with a negative economic impact on the Irish economy and living standards compared to the previous relationship. In the weeks since the end of the transition period on 31 December 2020, a level of trade friction has been evident. Given the phased basis of the new import controls which are being applied by the UK, it will take time for these to feed through to overall exporting activity, and to assess any associated economic impact.
In the face of Brexit, the Government has been taking steps to build up the resilience of the economy by developing and expanding our economic and trade relationships, both with our EU partners and with other overseas markets. The Mission Network abroad, in partnership with the State Agencies, are playing an important role in terms of public and economic diplomacy.
This trade shock and associated economic impact will be mitigated somewhat by a positive Foreign Direct Investment shock resulting from a redirection to Ireland of investment from firms looking to relocate within the single market. The nature, scale and complexity of Ireland’s international financial services sector will change in a number of ways, and the sector is becoming broader and more diverse with more firms carrying out a greater range of regulated activities than at any time. The full impact of Brexit for Ireland’s international financial services sector may not materialise for some years.
The Government and various state agencies continue to implement ‘Ireland for Finance’, the strategy for the development of Ireland’s international financial services sector to 2025’, and are working to fully capture any opportunities for inward investment that emerge through promoting Ireland’s strengths as a leading financial services centre.
In respect of the broader financial services sector, my Department has been working closely with the Central Bank of Ireland and the National Treasury Management Agency (NTMA), through the Financial Stability Group, and through the Brexit Contact Group, to limit the impact of key identified risks in the Irish financial system. This work and engagement has sought to ensure that the sector is adequately prepared, and that financial services firms and market participants have contingency plans in place to cope with the possible effects of Brexit, with as little disruption for consumers, investors and markets as possible. On the basis of its work and engagement across the sector, the Central Bank has been able to assure me that the financial services sector is well prepared and resilient enough to manage the changes associated with Brexit. My Department, the Central Bank of Ireland and the NTMA will continue to monitor developments and activities in the financial sector in accordance with their respective responsibilities.