Sunday 4 December 2016

North 'could lose more than £1bn' a year with Brexit

Published 17/04/2016 | 02:30

More than 60pc of goods exported from Northern Ireland go to Europe and direct farm payments to farmers there account for almost 90pc of farm income.
More than 60pc of goods exported from Northern Ireland go to Europe and direct farm payments to farmers there account for almost 90pc of farm income.

Northern Ireland's economy could lose £1bn (€1.25bn) a year through the loss of European Union and devolution funding in the event of a Brexit, according to an international expert in regional and urban economics.

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Dr Leslie Budd, reader in Social Enterprise at the Open University Business School and Chair of the Urban and Regional Economics Seminar Group (URESG), has also warned that any loss of R&D funding to the North's university sector will inhibit all-Ireland research in the areas of renewable energy, agri-business and sustainable fisheries.

Northern Ireland receives approximately £500m of funding per year from the EU and received nearly £2.5bn between 2007 and 2013 with respect to agriculture, structural funds and the PEACE programme.

It is also projected to lose up to £500m per year in so-called Barnett Formula (devolution) Funding when the North introduces a new devolved corporation tax rate of 12.5pc - equivalent to the Republic's - from 2018.

"Brexit will undermine the logic of a devolved corporation tax in that the relative costs of inward investing firms in the North will rise as Brexit will increase transactions costs, including the cost of doing business across the border," said Budd.

Budd, author of The Consequences for the Northern Ireland Economy from a United Kingdom exit from the European Union, was speaking to the Sunday Independent ahead of a Brexit discussion forum hosted this Thursday by the Foundation for Fiscal Studies.

"Trade is an issue, but as 50pc of EU trade is between firms, (regionally based) Global Value Chains are crucial and those linkages and spill-overs across the whole of Ireland to the rest of the EU could be broken," added Budd.

More than 60pc of goods exported from Northern Ireland go to Europe and direct farm payments to farmers there account for almost 90pc of farm income.

Some 81pc of businesses want to remain in the EU, despite high-profile political endorsements for a Brexit by First Minister Arlene Foster and Northern Ireland secretary Theresa Villiers.

Northern Ireland is more vulnerable to a Brexit than elsewhere in the UK, according to recent modelling by forecasters Oxford Economics.

"There is nothing based on the evidence of the past 30 years which suggests that the British Treasury at Whitehall is suddenly going to morph into a benevolent almshouse doling out largesse to Northern Ireland should we leave Europe," said Tom Kelly OBE, Chairman of the Northern Ireland Stronger in Europe campaign.

"In fact the long struggle to win a reduction in corporation tax was fought against tooth and nail by the Treasury and was only finally conceded with a reduction in the block grant.

"Theresa Villiers and Nigel Lawson, two advocates of leaving the EU, can't even agree whether there would be the reintroduction of border controls between Northern Ireland and the Republic or Northern Ireland and Britain.

"This is tweedledum and tweedledee politics which puts real people with real jobs at risk," he added.

Some of Northern Ireland's senior business figures have spoken publicly of their fears of Brexit.

Kevin McNamee, finance director with the Bangor-based Denroy Group, said the company - one of the North's most successful exporters - was worried about the prospect of new international trade agreements and punitive tariffs.

Denroy's products range from the world's best-known hairbrush brand, Denman, through medical devices and components for aircraft.

"We export to 80 countries and we're concerned about what's going to happen with trade agreements," Mr McNamee said.

"A Brexit could mean jeopardy for these trade deals, the implementation of tariffs and other obstacles to trade.

"A lot of our business is in the EU and we're asking how that will work out. This uncertainty is a major issue for many companies in Northern Ireland."

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