New research produced by the ESRI and the Department of Finance in Ireland shows that the potential long-term impact of Brexit on Ireland will be “severe”. The findings, which were published today, show the impact of Brexit on the level of real output in Ireland based across three scenarios and over a period of ten years. The research also examined the potential long-term impact of Brexit on Ireland beyond a ten year period.
The report shows just how important the UK economy is to the EU and indeed how key the EU economy is to the UK. According to the report, the UK is “the world’s fifth largest economy and the second largest in the EU with imports from the EU and exports to the EU amounting to €400bn and €300bn respectively in 2015”. It also reinforces the point that, while Ireland has “significantly diversified its economic relationships away from the UK over the last forty years, the UK is still one of its most important individual trading partners”.
The three scenarios applied in the research centred on three potential agreements that the UK could strike with the EU. They were “(i) a Norwegian-type solution whereby the UK becomes a member of the European Economic Area (EEA), with free trade and movement of workers (ii) a scenario based on the UK agreeing a bilateral trade agreement with the EU along the lines of the EU/Swiss trade agreements, where trade in services is not free and (iii) a third scenario, whereby the UK and EU do not conclude a bilateral trade agreement and instead, the UK exercises its rights under the Most Favoured Nation (MFN) clause of the World Trade Organisation (WTO).”.
According to the research, in each of the three scenarios that it examined, “the level of Irish output is permanently below what it otherwise would have been in the absence of BREXIT”. The level of output varies according to the scenario applied, but it ranges from 2.3 percent to 3.8 percent below what it otherwise would have been had Brexit not occurred.
When it comes to the long-term impact of Brexit on Ireland after ten years, the news isn’t any better. For example, the research finds that the average wage will drop from between 2.2 percent to 3.6 percent depending on the kind of trade agreement that the UK negotiates with the EU. It also finds that Brexit will lead to an increase in unemployment in Ireland, a reduction in government revenue from taxes, an increase in government spending on welfare payments and that the “net effect is a dis-improvement in the general government balance (GGB) over the long-term.”.
Overall, the researchers conclude that “There is almost a complete consensus in the existing literature that BREXIT will have a negative effect on the UK economy both in the short-term (via uncertainty) and over the medium-to-long term (via trade, FDI etc,). The UK is one of Ireland’s closest economic partners and, as such, Ireland will be very exposed to the effects of the UK leaving the EU.”
You can extrapolate from this report that Ireland will probably end up being the most badly impacted by Brexit of any EU country. And that’s just looking at the economic effects. The report, for example, doesn’t tackle the political impact of Brexit on the Peace Agreement and on long term stability for Ireland – North and South.