Lower wages, higher prices in all Brexit scenarios
Workers will be hit by lower wages, higher prices and decreases in employment rates in all Brexit scenarios. A study published today has found that 80,000 jobs would be lost in the next decade if Britain crashes out of the EU, and even if a deal is agreed around 44,000 posts would still be lost.
The study from the Economic and Social Research Institute (ESRI) and the Department of Finance finds GDP in Ireland 10 years after Brexit will fall 2.6% if the UK leaves with a deal, but could fall up to 5% in a disorderly no-deal scenario, compared to a situation where the UK stays in the EU.
The report’s lead author, Adele Bergin, said: “The impact of each Brexit scenario is considerable and will have negative effects throughout the economy on the household sector, the labour market, firms and the public finances.
“The negative impact on Irish output in the long run in the deal scenario is approximately half that of the no-deal scenario.”
The predictions are more pessimistic than previously outlined by the ESRI and reveal people will see a cut in their disposable income ranging between 2% less and 4% less depending on the type of Brexit.
Ms Bergin said it is highly unlikely the country would plummet into a long-term recession and instead we will see the pace of growth significantly slow down with negative consequences throughout the economy.
However, she warned it is difficult to predict the scale of impact a no-deal disorderly Brexit would have on Ireland, especially in the immediate aftermath.
The results of the study indicate employment, in the long run, would be 1.8% lower in a deal scenario, 3.2% lower in a no-deal scenario, and 3.4% lower in a disorderly no-deal scenario. However, there is more uncertainty about the short-term impact of Brexit as it depends on how smooth any transition to the new trading arrangements will be.
Unsurprisingly, the report also finds Ireland has far greater exposure than other European countries given how deeply integrated the economies are. In 2015, Irish exports to the UK accounted for 14% of total cross-border goods exports and 20% of total service exports.
The study also finds Ireland could benefit from Brexit in the area of foreign direct investment. It states that the UK is expected to lose a quarter of its foreign direct investment inflows in the event of a no-deal Brexit and 21% in the case of a deal. As Ireland is already an attractive destination for FDI, it is “reasonable to assume” that this country would gain some of this investment.
