Thursday 19 September 2019

David Chance: 'A hard exit now looks the most likely outcome - and it'll deliver a cruel sucker punch to these sectors of Irish economy'

  

A protestor who was blocking the road is removed by police outside the Houses of Parliament. Photo: Nick Ansell/PA
A protestor who was blocking the road is removed by police outside the Houses of Parliament. Photo: Nick Ansell/PA

David Chance

Come March 29, it could be chaos. Irish goods will start piling up in British ports, meat will start rotting on the docks, flights will be grounded and the Border with the North will be closed.

Welcome to the world of hard Brexit, now looking the most likely scenario for the UK as the Conservative government self-destructs and the unionists just say no.

The impact on our economy will be sharp and prolonged, tens of thousands of jobs will be lost, and firms will go out of business. No amount of rainy day funds will be enough.

The €500m that Finance Minister Paschal Donohoe squirrelled away is equivalent to 0.15pc of annual economic output.

For Ireland, the impact will be to shave 3pc points off long-term growth, according to the IMF, although some estimates put the impact as high as 9.4pc. With the economy growing 7pc plus this year, that might not sound like much, but it will hit hard. That said, Ireland will still be more prosperous in 2030 than it was in 2017.

The first sign will come from the foreign exchange markets on the value of the pound.

"Sterling continues to beat to the tune of Brexit, which seemingly changes beat every other day," economist Olivier Desbarres of 4X4 Global Research said.

Hard numbers

According to the Central Statistics Office, 85pc of Irish firms that imported goods did so from Britain and for 10,500 firms the UK was their only partner.

Among 8,600 exporting firms, 6,780 exported to the UK and half of those to the UK only. The UK accounts for 14pc of Irish exports and 26pc of imports.

The 10pc drop in the value of the pound in the wake of the June 2016 vote to leave chopped the value of Irish exports to the UK by €3.2bn, but the same devaluation saved Irish consumers and producers €2.8bn.

According to consultancy Copenhagen Economics which produced a report for the Government, exports of goods and services will drop 7.7pc in the event of a hard Brexit and imports would fall 8.2pc. It expects economic growth to be clipped by 7pc by 2030.

THE MOST EXPOSED INDUSTRIES

Pharmaceuticals and chemicals are 27pc of exports to the UK, and 14pc of its imports come from there.

US multinational Lilly's site at Kinsale produces human medicines and component products that pass through the UK to be shipped internationally. Merck UK is the exporter of a fertility drug to Ireland.

Agriculture and food is 13pc, of which processed food is 6.2pc of the total. So if you are Wicklow sheep farmer, you are in trouble, and if you are a worker, you may be one of the 12,400 that Copenhagen Economics said would lose their jobs in this industry.

Ornua, the maker of Kerrygold, has already said it is stockpiling cheddar on both sides of the Irish Sea in case of a hard Brexit. Of the 200,000 tonnes of cheese made a year, 90pc is cheddar, half of which is for export and half of those exports go to the UK.

LAYOFFS AND SMALLER PAYPACKETS

Under a hard Brexit scenario, Copenhagen Economics estimated that 20,000 jobs would be lost, equivalent to the churn of 1pc of the workforce over 10 years.

The biggest hit will come to wages and the lowest skill workers will be hardest hit, with pay-cheques falling 8.7pc versus a no-Brexit outcome by 2030. High-skill workers won't be immune, with a fall of 6.5pc, the consultancy said.

THE NORTH

If the State is hit hard, the much poorer North is in for worse. Hardest hit areas are likely to be Fermanagh and South Tyrone, Upper Bann and Mid-Ulster, which have the highest proportion of manufacturing jobs lost due to a disruption in EU trade, according to the Nevin Research Institute.

Women who work in the food-processing industries in these areas could be disproportionately hit.

Irish Independent

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