Sunday 21 April 2019

Disorderly crash-out will hit jobs and wages harder than expected here - ESRI

  

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David Chance

A disorderly no-deal Brexit will hit Irish jobs and wages harder than previously expected, according to a leading economic think-tank.

The Economic and Social Research Institute (ESRI) said if the UK crashes out without a deal, unemployment in Ireland will rise 2pc while wages will fall 1.4pc.

It warned economic output next year will be down 2.4pc if the UK leaves the European Union without any time to transition to new trading arrangements.

In a report published today, it said the costs will mount over time so that in 10 years' time the economy could take a 5pc hit.

That compares with a forecast of -3.8pc over 10 years made in November 2016 and reflects the deeper wounds a disorderly no-deal would inflict on the UK economy, which will in turn produce more damage for trading partners like Ireland.

The ESRI calculates that if the UK leaves without a deal, but the two sides managed to agree a period of adjustment that would allow a transition to trading under World Trade Organisation rules, growth here would take a 1.2pc hit in 2020 and in 10 years the economy would be 4.8pc smaller than it would have been had the UK stayed in the European Union.

A negotiated departure would be the least bad option, creating a 0.6pc hit next year and 2.6pc after 10 years, it said.

"Overall our impacts are more negative than in the previous study," said Dr Adele Bergin, a senior research officer at the ESRI.

The EU warned yesterday that it was "increasingly likely" the UK would leave without a deal in less than three weeks' time.

An agreement struck last week allowed an extension of the negotiating process, which had been due to end on Friday, until April 12.

And while the majority of the House of Commons is opposed to leaving without a deal, that will become the default option unless Prime Minister Theresa May secures parliamentary backing for a deal, which has eluded her twice already.

The damage to the economy inflicted by a no-deal outcome will add 2pc to unemployment over time, the ESRI noted.

And, in the worst case scenario, real wages will be 1.4pc lower than had the UK remained.

However there is a silver lining amid the Brexit clouds as investment here by multinational companies would rise once the UK loses tariff-free access to the EU market, the report noted.

In aggregate terms, the gain from foreign direct investment could amount to around €26bn, which would represent an increase of 3.3pc over the current stock of Irish FDI, it said.

Gains from this would be concentrated in the computer, electronic and optical products industries and would boost exports by 2.8pc over 10 years.

Ireland has already added 4,000 jobs from firms relocating here ahead of Brexit, according to Government figures, and so far the economic impact from the protracted uncertainty has been muted.

Irish Independent

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