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Central Bank's dire no-deal Brexit warning: 34,000 fewer jobs by the end of 2020

Economic growth would slump to less than one per cent next year, the regulator has warned.

Image: Brian O'Leary via RollingNews.ie

A NO-DEAL BREXIT would deliver a massive jobs hit in Ireland, the Central Bank has warned. 

In its latest quarterly bulletin, the bank has said economic growth in Ireland is now expected to be 4.9% this year and 4.1% by 2020.

The unemployment rate meanwhile is projected to decline from 4.7% this year to 4.5% next year. 

Those central forecasts, however, are based on a deal on Brexit being reached and a transition period coming into effect until the end of 2020. 

Given the unprecedented nature of Brexit, and the uncertainties in the international trading environment, there is considerable uncertainty around potential outcomes, the regulator noted. 

In the event of a no-deal Brexit from the end of October this year, Central Bank estimates suggest that economic growth would be reduced to 0.7% next year, with around 34,000 fewer jobs by the end of 2020 compared to the central forecast. 

In the event that a disorderly, no-deal Brexit can be avoided, underlying economic activity is expected to perform strongly in 2019 and 2020.

The Central Bank warned that, given the already cyclically advanced stage of the economy, there is a material risk that continued strong expansion could give rise to overheating and generate sustained upward wage pressures.

“In the event that the disruption from a no-deal Brexit is avoided, there is a risk of overheating occurring in the Irish economy given that output is now at or close to full capacity,” Central Bank director of economics and statistics Mark Cassidy said.

“The uncertainties around Brexit and managing the risk of overheating increase both the challenge and importance of charting the appropriate fiscal policy path,” he said. 

If a disorderly Brexit can be avoided, the underlying outlook and, in particular, the risk of overheating, emphasises the importance of a more ambitious improvement in the fiscal position.
On the other hand, if a disorderly Brexit were to occur, there would be a material deterioration in the public finances and the fiscal environment would be significantly more challenging. 

In this case, Cassidy said, “there may be need to provide targeted support to the parts of the economy that are most affected”. 

Business uncertainty 

Meanwhile, the percentages of SMEs in the Republic of Ireland being negatively impacted due to economic and political uncertainty surrounding Brexit has doubled from 21% to 42% in the past year. 

That’s according to the AIB Brexit Sentiment Index for the second quarter of the year. 

By comparison, 48% of SMEs in Northern Ireland admitted their businesses were now being negatively impacted by Brexit.

Meanwhile, the delays implementing Brexit are also continuing to weigh heavily on overall sentiment, with 37% of SMEs in the Republic and 40% in the North claiming the delay is having a negative impact on their business.

While just 1% of SMEs in the Republic have let go staff as a result of Brexit, 11% have postponed plans to hire new staff, according to the Index. 

In Northern Ireland, meanwhile, 3% of SMEs have already let go staff while 17% have postponed plans to add to their existing workforce.

The research also shows that 40% of SMEs in the Republic that had planned to expand or invest in their businesses have since cancelled or postponed these plans while another 16% are reviewing them.

Similarly, in the North, 38% of SMEs have either postponed or cancelled investment plans while 10% are currently reviewing them. 

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