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Independent.ie

Friday 20 July 2018

Warning: How Brexit will hit agri-food

'Regulatory divergence' faces 90pc of economy

The Government-commissioned report found that five key sectors of Irish industry will bear the brunt of Brexit, with beef, diary and processed food companies being the most negatively impacted. Stock photo
The Government-commissioned report found that five key sectors of Irish industry will bear the brunt of Brexit, with beef, diary and processed food companies being the most negatively impacted. Stock photo
Philip Ryan

Philip Ryan

A stark new Brexit impact study has identified the agri-food sector as the industry to be the worst affected by Britain's decision to leave the European Union, the Sunday Independent can reveal.

The Government-commissioned report found that five key sectors of Irish industry will bear the brunt of Brexit, with beef, dairy and processed food companies being the most negatively affected.

It can also be revealed that Taoiseach Leo Varadkar is planning to nominate the former Ulster Farmers' Union President, Ian Marshall, to stand in the forthcoming Seanad by-election. Mr Marshall is being nominated for his expertise on how border farming communities will be impacted by Brexit but the move may also help repair relations with the DUP.

A Brexit boost for Ireland is due to be delivered in the coming days with successful talks expected to restore the power-sharing assembly in Northern Ireland.

Meanwhile, the Government's Brexit study also found the wholesale and retail sector, which includes restaurants and tourist accommodation, will see major job losses due to a significant drop in consumer demand.

The Department of Business, Enterprise and Innovation study, which was undertaken by the respected Copenhagen Economics consultancy service, also warned fewer British tourists will visit Ireland once the UK leaves the EU. Companies selling electronics also face major challenges if Britain leaving the EU results in significant differences in regulations in the area of electronic goods.

The pharmaceutical and chemicals companies will have to brace themselves for economic fallout from Brexit due to the size of the sector.

The aviation industry was also highlighted as facing dangers as air traffic rights and regulations between the EU and the UK will no longer be aligned after Brexit.

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The report said the "risk of regulatory divergence" was the main factor driving fears across all five sectors which make up 90pc of the economy.

"Even a relatively small Brexit impact at the firm level in these sectors has adverse consequences for the wider economy," it stated.

Fianna Fail's Brexit spokesperson Stephen Donnelly said the report should serve as a "wake-up call" and said the Government had "dithered" in its response to a hard Brexit.

"The chest beating of the past 18 months needs to be cooled down, and we need to start doing the groundwork needed to protect Irish jobs," Mr Donnelly said.

The report, which was prepared for Minister for Business Heather Humphreys, warns that 20,000 jobs or 1pc of the entire workforce could be lost across all five sectors in the case of a hard Brexit.

The agri-food sector would see 12,400 job losses, while an additional 6,300 would become unemployed in the manufacturing and construction industry. The wholesale and retail sector, along with the aviation industry, would experience 1,300 job losses.

If Britain were to remain in the European Economic Area (EEA), the number of jobs lost would be around 10,000.

The study considered a range of outcomes across various post-Brexit scenarios, including an EEA arrangement, a customs union agreement, a free trade deal or the worst case scenario - a hard Brexit which would lead to World Trade Organisation (WTO) tariffs on all goods and services

The report said a WTO scenario would have the "most negative impact" on the economy. The economy is still projected to grow until 2030 but gross domestic product could be 7pc lower than expected in this case. An EEA arrangement would see the economy shrink by around 2.8pc.

"All of the scenarios considered produce a result that is less favourable for Ireland than a non-Brexit scenario. Nevertheless, regardless of the scenario, the Irish economy is still expected to record strong, positive growth out to 2030 - Brexit has a dampening impact, however, resulting in a lower growth rate than would otherwise have occurred," it said. Humphreys told the Sunday Independent she was "acutely aware" that certain sectors were exposed to Brexit.

"What I can say at this point, is that the report clearly underlines the importance of a satisfactory transition period and exit deal," she said.

"In that regard, the Government is utterly determined to get the best possible deal for the Irish people, negotiating as part of the EU 27, and in full support of chief negotiator, Michel Barnier.

"The Government has already taken significant steps to prepare our economy, including through my department's Action Plan for Jobs and Building Stronger Business document, the Trade and Investment Strategy.

"We announced a number of bespoke measures in Budget 2018, such as the doubling of Brexit-related staff for State agencies as well as five new missions with a trade focus for the Department of Foreign Affairs and Trade.

Sunday Independent

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