Risk of no-deal Brexit remains, warns Central Bank deputy governor
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 has warned.
Ed Sibley told the DCU Brexit Institute today that, even if UK lawmakers do approve the proposed UK-EU agreement in the weeks following the December 12 election - the risk of a no-deal exit by 2021 will remain.
"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, the UK and EU would seek to achieve a free trade agreement 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 is 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 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 already has sacrificed 2.5pc of potential growth to Brexit disruption since the 2016 referendum - and stood 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.