Wednesday 23 October 2019

Ireland faces hit from UK spending slump

Favourite: The chances of no deal would rise under Boris Johnston
Favourite: The chances of no deal would rise under Boris Johnston

David Chance

A major survey of UK consumers is forecasting that spending will fall to its lowest level in six years as Brexit approaches - a move that will crimp exports here and damage the tourism sector.

The EY Item Club survey, forecast spending would rise by just 1.6pc this year as strength in the labour market would decline as companies started to plan for slow economic growth and prolonged Brexit uncertainty.

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"What is weighing on consumer sentiment is a combination of political uncertainty and a not unrelated weakening in the housing market," said Investec chief economist Philip O'Sullivan.

The UK GfK consumer confidence indicator is currently at -10, not much above the -12 it recorded in the immediate aftermath of the Brexit referendum, while the Rics index for housing has been in persistently negative territory for nine months now, Mr O'Sullivan noted.

Some companies like Ryanair and ferry operator Irish Continental are exposed to the UK economy via tourism.

Irish Continental said in its latest operating update that the original March 31 exit date for Britain had dampened passenger demand. The biggest exposure for Irish goods is in the agrifoods sector, where the outlook will be determined by the post-Brexit tariff regime.

The likelihood of a no-deal outcome has increased significantly with eurosceptic Boris Johnson odds-on favourite to become the next leader of the Conservative Party and Prime Minister. That will entail hefty trade tariffs, according to Ivan Rogers, who was Permanent UK Representative to the EU until 2017. "The EU is entirely within its WTO rights to say that it will treat us as a bog standard third country, without any preferential arrangements, the day after we leave.

"And if we refuse to sign a Withdrawal Agreement, there is no interim deal," he wrote in the 'Spectator' magazine.

Irish Independent

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