Tuesday 17 January 2017

Brexit fallout will damage Irish economy for five years - ESRI warns

Published 21/09/2016 | 00:02

The ESRI altered its forecasts on the Republic's economic growth because of Brexit. Photo: Aidan Crawley/Bloomberg
The ESRI altered its forecasts on the Republic's economic growth because of Brexit. Photo: Aidan Crawley/Bloomberg

The fallout from Brexit will hit Ireland's economy for another five years, one of the country's leading think-tanks has warned.

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The Economic and Social Research Institute (ESRI) repeated its warning that the Northern Ireland economy would be worst hit by the UK's split from the European Union.

Research professor Kieran McQuinn said investment into Republic has already slowed and businesses with an all-island basis such as farmers and food processors will be among those feeling the most pain.

He added that tourism from Britain is being damaged due to a weak sterling and unemployment would no longer fall as sharply as in recent years.

"There's no doubt there will be opportunities," he said.

"But if you factor in the overall impact of Brexit it will probably mean the Irish economy will be growing at a slightly slower rate over the next four to five years than if Britain had stayed part of the European Union."

He added: "We think, of all the economies, Northern Ireland is going to suffer the most because of Brexit."

The ESRI altered its forecasts on the Republic's economic growth because of Brexit.

It dismissed the 26% economic growth that Ireland reportedly enjoyed last year and said the real figure was around 5.5%.

It said Brexit would mean a slight cut in growth this year to 4.3% and again next year to under 4%.

"Overall we are still quite positive but our output is a little bit down than if Brexit had not occurred," Mr McQuinn said.

"Ultimately you continue to see a fall-off in unemployment in Ireland but that fall-off is probably happening at a slower pace than if Brexit had not occurred," he said.

The ESRI offered a dismal scenario for the Republic and Northern Ireland last year when it examined the possible ramifications of the UK leaving Europe.

It talked about up to 3 billion euro (£2.5 billion) in lost trade and higher energy prices every year and it is running new analysis in an attempt to advise the Government in time for next month's budget of the longer term impacts of Brexit.

It is estimated both the Republic and Northern Ireland would suffer a 20% drop in trade.

On the positive side Mr McQuinn said there are significant implications from Brexit for the City of London.

"That could obviously spark opportunities for certain relocation to come and happen here in Ireland," he said.

The ESRI also examined the housing market and Central Bank rules on mortgage lending and repeated its call for the limits to take into account the state of the market.

It said it would take up to four years for the full impact of lending restrictions to play out but its projections pointed to house prices being 3.5% lower and ultimately a 5% fall in the number of houses built.

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