Sunday 8 December 2019

Risk of no-deal Brexit remains, Central Bank deputy warns

Central Bank Deputy Governor Ed Sibley, Photo: Tony Gavin
Central Bank Deputy Governor Ed Sibley, Photo: Tony Gavin

Shawn Pogatchnik

The apparent "end of the beginning" to Brexit has not removed the risk to Ireland of an eventual British crash-out, the Central Bank deputy governor warned yesterday.

Ed Sibley told the DCU Brexit Institute that, even if UK lawmakers approve the proposed British-EU agreement in the weeks following the December 12 election, this will not remove the risk of a no-deal exit in late 2020 or 2021.

"The ultimate outcome is still uncertain," he said. "While we may be reaching the end of the beginning, a hard Brexit is still sufficiently plausible to require planning for."

Mr Sibley said if the UK parliament approved the Brexit agreement before the recently extended January 31 deadline, Britain and the EU would seek to achieve a free trade deal by late 2020.

But successful negotiations during this transitional period "could still end in a no-deal departure", he cautioned.

"We are satisfied that the Irish financial system is, overall, resilient enough to withstand a hard Brexit. However, not all 'cliff-edge' risks are fully resolved. Any additional time should be used to address them," he said.

Mr Sibley said that even if a free trade agreement was struck, the UK's apparent determination to press ahead with regulatory divergence from EU standards, and more complex rules on tariffs and customs, would complicate "cross-border trade across a range of sectors".

"Even if ratified, the current proposed deal will have economic impacts and affect the provision of financial services across the EU," he said.

Mr Sibley gave his presentation hours after a British think-tank, the National Institute of Economic and Social Research (NIESR), published research estimating that the UK economy has already sacrificed 2.5pc of potential growth to Brexit disruption since the 2016 referendum - and stands to lose another 3.5pc if Brexit becomes reality.

The NIESR study assumes that the proposed deal will be ratified and a UK-EU free trade pact reached. Despite this relatively benign scenario, the report forecast that British GDP would be 3.5pc lower - equivalent to £70bn (€81bn) - by 2030, versus an alternative growth path that avoids Brexit.

The report forecasts that a crash-out Brexit would reduce the UK's potential growth by 5.6pc by 2030.

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