Monday 23 October 2017

EU exit would hit UK global trade and we would suffer fallout, Oireachtas told

British Prime Minister David Cameron
British Prime Minister David Cameron
Colm Kelpie

Colm Kelpie

The British economy will suffer in the run-up to a referendum on European Union membership and this will have a knock-on effect on Ireland, a University College Dublin economist has predicted.

Joe Durkan, who lecturers in economics at the university, also warned that Britain would be sidelined in global trade talks, and the City of London, the UK's financial heart, will also lose influence.

A senior Conservative MP has already warned that Prime Minister David Cameron's pledge to hold the vote is already costing the country investment.

Mark Garnier, a member of the Treasury Select Committee, said this week that the referendum promise was having a destabilising effect.

Mr Durkan told TDs and Senators at the Oireachtas EU Affairs Committee yesterday that uncertainty was detrimental to investment.

"The last [EU] referendum that was held in Britain led to a reduction in investment and it led to capital flight because of the fear that Britain wouldn't be a member of the European Union," Mr Durkan said. "I think there's no doubt that the UK economy's performance would deteriorate in the short to medium term. That's almost inevitable because of the uncertainty."

Mr Cameron has said he would like to bring forward the planned referendum from 2017 if possible. Under pressure from Eurosceptic members of his own party and the rise in popularity of the anti-EU UK Independence Party (UKIP), Mr Cameron has pledged to renegotiate Britain's ties with the EU and try to claw back powers to London.

He has said he will hold a referendum in 2017, or possibly even earlier, if the Conservatives get back into power after the May elections.

But Mr Durkan told the Committee, which is looking at the potential impact of a UK exit from the European Union, that Britain outside the EU would have to negotiate a trade deal with Brussels that may not be entirely favourable to it.

The economist said a declining UK economy would have a detrimental effect on Ireland because of the strong economic links between the two countries.

"For us, the performance of the UK economy is critical. If it weakens, then it will lead to a weakening of the growth of this economy, I don't see how that can be avoided," Mr Durkan said.

He also said he didn't believe there was a chance that multinationals will opt to go to Ireland if the UK pulls out of the EU.

"I don't think there's any likelihood that Foreign Direct Investment that goes to the UK will come to Ireland," he said.

"Most that goes to the United Kingdom sees the UK market as important. They are there because the market is big."

Irish Independent

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