News Editorial

Friday 28 October 2016

Brexit and the Ireland question

Published 01/05/2016 | 02:30

David Cameron. Photo: Reuters
David Cameron. Photo: Reuters

In less than two months, the people of the UK will decide by referendum on whether Britain should leave or remain in the European Union in what Prime Minister David Cameron has said will be the vote to settle the European question in British politics. As one of the UK's closest trading partners, the impact of Brexit on Ireland could be substantial. It has been estimated that in a worst-case scenario Ireland could see a permanent loss of 3.1pc to GDP in 2030 and even in the best-case scenario the loss would still total 1.1pc GDP.

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These potential developments are unlikely to weigh too heavily on the minds of those in the UK determined to leave the EU, but the sizeable Irish community there will be mindful of the impact here. Citizens from the Republic living in Britain are allowed to vote in June's referendum - the only EU country other than Commonwealth nations Malta and Cyprus granted this, and experts have said that their impact could win the fight for the Remain campaign. A recent online poll of nearly 25,000 Irish people revealed the country overwhelmingly supports Britain remaining in the EU. In such a tight race, hundreds of thousands of Irish immigrants could decide the referendum and Remain campaign groups are now trying to mobilise this demographic as polling day approaches.

The impact of Brexit on Ireland is so large due to the significant amount of Anglo-Irish trade. While the importance of UK trade to Ireland has fallen, Ireland still exports 16pc of its manufactured goods and 19pc of services to the UK. It currently imports 34pc of its goods from the UK and 18pc of its services. As a small, open economy, trade in goods is equivalent to almost 80pc of Irish GDP. Any barriers which disrupt that trade will involve significant costs.

It is also worth noting that, while some of the impact of Brexit on the UK is offset or bolstered by a significant saving from the EU budget, Ireland would actually find itself with an additional budget payment to make - other member states would need to cover the loss of UK net contributions. In 2030, Ireland's additional payment could total roughly €177m per year (0.1pc GDP). Some change in foreign direct investment flows is also likely.

There are also likely to be political implications, particularly in Northern Ireland. The most important issue to address would be the arrangements for a new border, although retention of the Common Travel Area would avoid the need to introduce passport controls, which would enable the continued free movement of people between the UK and Ireland. Arrangements would also need to be made to minimise the impact on cross-border trade.

So, what is likely to happen? An ICM poll out last Tuesday put Leave ahead on 46pc (+2), with Remain on 44pc (+1). A Survation poll last Wednesday put Leave up three points on 38pc (albeit still behind Remain on 45pc (-1)). A YouGov poll from Thursday had Leave ahead on 42pc (+3) and Remain on 41pc (+1).

The outcome will be close, but if you follow the money then the prospect increases that the UK will remain. The markets rallied, with the pound rising last week to a six-week high against the euro following comments by President Obama that the UK would move to the "back of the queue" in any free trade negotiations with the US post-Brexit. So while the Remain camp is arguably leading the economic argument thus far, the debate will be on shakier ground when it moves to the issue of immigration.

Sunday Independent

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