Contingency planning at both a domestic and an EU level is focused on three areas: preparing for a no-deal scenario or so-called “disorderly Brexit”; preparing for a transition period based on the “status quo”; and preparing for the future EU-UK relationship.
While the outcome of the December European Council and the move on to Phase 2 has lessened the likelihood of a disorderly Brexit, very detailed work on a no-deal or worst-case-scenario is advancing intensively through the cross-Departmental coordination structures chaired by the Department for Foreign Affairs and Trade. This work is also informed by ongoing stakeholder engagement. Separately, a new preparedness unit in the Commission is considering EU-level responses.
All this work provides a baseline scenario for the policies and sectors impacted, which can then be adapted as appropriate in light of developments in the EU-UK negotiations. In this regard, it is welcome that the direction of travel is now firmly towards achieving a “status quo” transition period. Agreement on a “status quo” transition will provide certainty to individuals and businesses while also aiming to avoid any cliff edge effects between the UK leaving the EU and a future relationship agreement coming into force. The period will provide time for businesses and citizenship to prepare for the UK’s withdrawal from the EU based on the outcome of the negotiations on the framework for the EU’s future relationship with the UK. In this respect, the expectation is that the European Council will adopt additional Guidelines at its meeting on 22-23 March 2018 on the framework for the future EU-UK relationship. These guidelines – as well as further clarity on the UK position, which has been sought by the European Council – will provide a clearer picture of the direction of travel in the negotiations.
The Government’s contingency planning continues to be firmly grounded in the extensive work and outreach that has already been undertaken by individual Departments and agencies, as well as by stakeholder organisations, academics and others. Much of this is in the public domain.
Working through the cross-Departmental coordination structure, my Department has been to the fore in producing and funding a number of Brexit-related studies, both before and since the UK's referendum decision. In addition, regular updates of my Department’s Macro-Economic forecasts take account of the impact of Brexit. Published and commissioned Brexit-related studies by my Department and include:
- 'Scoping the Possible Economic Implications of Brexit on Ireland' – A scoping study of scenarios for the future relationship between the UK and the EU. Published under the Department of Finance-ESRI research programme in November 2015;
- ‘An Exposure Analysis of Sectors of the Irish Economy’. An in-depth analysis of the possible sectoral and regional impacts of Brexit arising from Ireland's trade relationship with the UK, published by Department of Finance in October 2016 (Updated March 2017);
- 'Modelling the Medium to Long Term Potential Macroeconomic Impact of Brexit on Ireland' - Published under the Department of Finance-ESRI research programme in November 2016; and
- ‘Trade Exposures of Sectors of the Irish Economy in a European Context’ – An analysis of trade exposure to the UK in comparison to other EU Member States, published by the Department of Finance in September 2017.
All of these studies have been made public on the Department of Finance Brexit webpage: http://www.finance.gov.ie/what-we-do/brexit/. Costs incurred for the 'Scoping the Possible Economic Implications of Brexit on Ireland' paper and the 'Modelling the Medium to Long Term Potential Macroeconomic Impact of Brexit on Ireland' paper, formed part of the overall costs under my Department’s research programme with the ESRI.
The results in these studies published by my Department and the ESRI, show that the potential impact of Brexit on the Irish economy will be significant. In the joint paper my Department published with the ESRI, that assessed the medium to long term potential macroeconomic impact of Brexit on Ireland, the study shows that ten years after a UK exit from the EU, the level of Irish output, could reduce in a range from 2.3 per cent to 2.7 per cent and 3.8 per cent (i.e. under a EEA scenario, a FTA scenario and a WTO “hard Brexit” scenario, respectively), below a baseline of what it otherwise would have been. These results are on a no policy change basis. However, with the future trade path between the UK and EU still unknown, it is crucially important that we prepare our economy for the challenges ahead.
In this context, the Government has already taken a number of important steps including in Budgets 2017 and 2018, the Action Plan for Jobs, Ireland Connected our Trade and Investment Strategy and the preparation of a new 10-year Capital Plan. The best way to deal with the uncertainties arising from Brexit is to continue the Government's competitiveness oriented policies and prudent management of the public finances.
