'We will need a lot of money to save people's jobs' - Varadkar issues harshest warning over hard Brexit
The Government will need to find “a lot of money” in 10 to 12 weeks' time to “save people’s jobs” if the UK continues on a path towards a hard Brexit.
Taoiseach Leo Varadkar has offered the starkest warning yet on the economic impacts of the UK crashing out of the European Union.
Speaking after a phonecall with British Prime Minister Theresa May, the Taoiseach said jobs will be lost unless a deal is secured.
He told the Dáil that while the Department of Finance is not projecting a new recession, unemployment will rise and plans to run a surplus will be abandoned.
The Department of Finance is now warning that under a disorderly Brexit:
- The Irish economy could be 4.25pc smaller than the current projections over the medium-term
- Ireland would be hit much harder than the rest of the EU
- Industries such as agri-food and small businesses would bear the brunt
- Employment would increase more slowly and the unemployment rate could rise by 2 percentage points
- The public finances would deteriorate – the modest surplus projected for 2020 would turn to deficit
- Weaker sterling and trade disruption would hit our exports, and domestic spending would be lower due to higher prices, uncertainty, and extra saving.
Mr Varadkar said the country is “in a good position” to borrow from the markets if necessary.
It’s understood that Finance Minister Paschal Donohoe will outline later that a no deal scenario will result in the Government running a small deficit.
However, he will rule out an emergency budget.
Mr Varadkar repeated his insistence that no planning is underway for border infrastructure.
And he said: “Britain is to blame for Brexit. Absolutely nobody else is blame for Brexit.”
Mr Donohoe said a no-deal Brexit would be “particularly severe”.
He said the figures may hide “an even larger hit to economic activity in labour-intensive sectors such as agri-food and indigenous small and medium-sized enterprises”.
The minister warned that given Ireland’s unique economic set up certain sectors will be hit “disproportionate relative to the rest of the EU”.
“It is important to recognise that such estimates may not capture the full impact, and the figures may be conservative.
“Nevertheless, quantifying the impact is important to help Government understand the possible macroeconomic implications and to design the appropriate policy response.”
The figures are based on research carried out by the Department of Finance. Though they believe the economy will continue to grow in the event of a no-deal Brexit, it would be at a slower pace.
For example – if they were projecting 6pc growth at the moment over the medium term– that would be revised down to 1.75pc.
“There remains considerable uncertainty surrounding the format the UK’s exit from the EU will take. The assessment by my department shows that a disorderly exit would be particularly severe,” Mr Donohoe said.
“The level of economic activity will be around 4.25 percentage points lower than our existing trajectory over the medium-term.
"This aggregate figure hides an even larger hit to economic activity in labour-intensive sectors such as agri-food and indigenous small and medium-sized enterprises.
“Further, given Ireland’s unique macroeconomic and sectoral exposures to the UK these impacts would be disproportionate relative to the rest of the EU.
"It is important to recognise that such estimates may not capture the full impact, and the figures may be conservative. Nevertheless, quantifying the impact is important to help Government understand the possible macroeconomic implications and to design the appropriate policy response.”
Impacts of a no-deal Brexit as set out by Finance Minister Paschal Donohoe today:
• Cost of shopping in high street stores to increase
• Households to have less disposable income
• Budget surplus for 2019 to be turned into a deficit
• Unemployment to rise by 2pc by 2020
• 55,000 fewer jobs than currently predicted 2023
• Job losses likely to kick in during second half of this year
• Economy to be 4.25pc smaller in 2023 than projections
• Agriculture and food industries to be immediately impacted
• Tax cuts still planned but could be reviewed
• Too soon to say if capital projects like Metro will be curtailed
• Multinational business could actually grow