Wednesday 23 October 2019

Central Bank warns of 'initial' sharp Brexit shock

Disruption concerns: Central Bank deputy governor Sharon Donnery has fears over the impact of a hard Brexit
Disruption concerns: Central Bank deputy governor Sharon Donnery has fears over the impact of a hard Brexit

David Chance

The woman who is expected to become the next head of the Central Bank of Ireland has warned other central bankers that there would be an immediate shock to Irish exporters in the event of a hard Brexit.

Speaking at an internal event on March 5, deputy governor Sharon Donnery said that so far there had been little impact on the economy from the uncertainties surrounding the UK's exit from the European Union.

"Exports would fall due to an immediate and large reduction in demand from the UK and the fall in sterling, with some sectors being further affected by any imposition of tariffs and non-tariff barriers," Ms Donnery told the meeting, according to a recently released transcript.

The worst-affected areas would likely be agriculture, food and smaller-scale manufacturing, as well as rural areas, particularly the Border regions, she said.

The Central Bank of Ireland estimates that economic growth here could fall to as little as 1.5pc this year if the UK leaves without a deal on March 29.

Although UK lawmakers have voted to take a no-deal option off the table, they are no closer to an agreement with the EU and with just 11 days to go to the deadline, the UK government needs to agree an extension to avert a cliff-edge exit.

Despite the threat of Brexit, Ms Donnery noted that, so far, "the impact on Ireland of uncertainty related to the UK's exit appears to have been small", and said that the Central Bank had worked with European and UK authorities to ensure finance continued to flow.

As well as an exchange rate shock, Ms Donnery said that a hard Brexit would cause firms to cancel investment plans, creating a risk for the employment outlook and consumer spending due to the risk of job losses and concerns over pay cheques.

"At least for an initial period, it is likely that there would be disruption at ports and airports if infrastructure is unable to cope with the new arrangements," she said.

The UK parliament is expected to vote for a third time on Prime Minister Theresa May's deal this week.

Irish Independent

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