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Even in the best-case Brexit scenario, the Irish economy will still take a hit - government report

The Irish economy could take a hit of up to 7% in its GDP
Feb 13th 2018, 2:43 PM 20,083 56

gdp Ireland's growth would be less in any Brexit scenario Source: Department of Business, Enterprise and Innovation

THE IRISH ECONOMY will grow by 7% less than it would have without Brexit in the worst-case scenario and by 2.8% less in the best-case scenario, according to a new report published by the government.

The independent study by Copenhagen Economics examined the impact to Ireland from Brexit under a number of potential outcomes.

Minister for Business, Enterprise and Innovation Heather Humphries said that the study “underlines the importance of a satisfactory transition period and exit deal”.

She did, however, stress that this report was based on the government not making a number of policy decisions to try to mitigate the effects.


The report looked at the impact of Brexit from four different scenarios.

The first was an EEA scenario, where a deal is struck between the EU and the UK like the deals between the EU and Norway, and Iceland. This scenario would see largely duty-free trade between Ireland and the EU.

Under this scenario, Ireland’s economy will grow by 2.8% less by 2030 than it would have if the UK remained in the EU.

In the Customs Union scenario, duty-free trade exists on a number of fronts, but there is a higher risk of regulatory divergence for goods and services. In this scenario, GDP growth is 4.3% less than it would have been without Brexit.

In a free trade agreement scenario, the impact is the same as customs posts and border inspections will hit growth.

The worst case is a WTO scenario, where it is assumed that trade will be governed by World Trade Organisation rules.

The report says: “In this case, the UK and the EU will impose MFN tariffs on each other’s goods where these are not bound by existing plurilateral agreements or arrangements… As in the previous scenarios, the introduction of border inspections add customs costs.”

Under this arrangement, the growth of the Irish economy would be 7% less than it would have been without Brexit.

This compares to the economic crash of 2008/9 where the Irish economy took a hit of over 8% to its GDP.

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Taking a hit

The report says that Brexit will “also impact Irish wages negatively for all skill groups”.

“In the WTO scenario, our results show that real wages will be 8.7% below the 2030 non-Brexit baseline level for low skilled workers, while the equivalent negative effect for high skilled workers will be 6.5%,” it says.

Certain sectors will bear the brunt of the negative effect, with agri-food, pharma-chemicals, electrical machinery, wholesale and retail, and air transport set to account for 90% of the impact of Brexit.

The report adds that some domestic policies could be pursued as an opportunity from Brexit, “notwithstanding the fact that the overall impact of Brexit will be negative for Ireland”.

Humphreys said: “We are acutely aware that certain sectors are particularly exposed to Brexit. That is why, among other supports, we will be rolling out a new €300m Brexit Loan Scheme in late March, which will be open to all sectors, with at least 40% of low-interest loans being made available to the agri-food sector.”

She said a number of government initiatives would attempt to mitigate the effects of Brexit on the Irish economy, as per the recommendations in the report.

You can read the report in full here

Read: Theresa May says there is ‘basis for agreement’ to get Stormont ‘up and running very soon’

Read: Explainer: Why the “cast iron” guarantee for no hard Brexit border may now be in doubt

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