Disorderly Brexit could cause loss of 80,000 Irish jobs, report warns

A disorderly no-deal Brexit will put up to 80,000 jobs at risk, delivering a deep and damaging shock to the Irish economy, a report by the Department of Finance and the Economic and Social Research Institute (ESRI) has warned.

The study, the most comprehensive to date, estimates the impact of three Brexit scenarios on the Irish economy: the UK leaving with a deal, the UK leaving without a deal and the UK leaving without a deal when there is an additional disruption to trade in the short run.

In a disorderly scenario, economic output here would be 5 per cent lower after 10 years than if the UK remained in the European Union, while employment would be 3.4 per cent lower, which equates to 77,500 fewer jobs. The disorderly scenario would also mean a hit to real wages of approximately 1.4 per cent with a knock-on impact on consumption.

The study estimated the impact of Brexit on the Irish economy by focusing on the impact on trade, incorporating the impact of tariff and non-tariff measures, and the potentially positive impact of foreign direct investment (FDI) diverted to Ireland.

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Foreign direct investment

While the FDI effect is expected to be beneficial for the Republic, this positive impact is outweighed by the negative trade effect.

Even in the case of a managed no-deal scenario, where the UK exits without a deal and tariffs are imposed but there is an orderly period of adjustment for trade, economic output here would be reduced by 4.8 per cent over 10 years with employment 3.2 per cent down and wages 1.3 per cent below what they would have been without Brexit.

The impact of each Brexit scenario is considerable and will have negative effects throughout the economy

The most benign outcome for Ireland, which involves the UK exiting with a deal and a transition period to the end of 2020, would see a 2.6 per cent hit to economic output, a 1.8 per cent reduction in employment and a 0.7 per cent reduction in wages.

The report, however, cautions there is more uncertainty about the short-run impact of Brexit as it depends on how smooth any transition to the new trading arrangements will be.

‘Negative effects’

It indicated that, by 2020, the level of real output in the Irish economy would be 0.6 per cent, 1.2 per cent and 2.4 per cent lower in the deal, no-deal and disorderly no-deal scenarios, respectively, compared to a situation where the UK remained in the EU.

"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 report's lead author, Adele Bergin, said.

“Overall, in each scenario, the level of Irish output is permanently below where it otherwise would have been were the UK to decide to remain in the EU,” she said.

“However, the negative impact on Irish output in the long run in the deal scenario is approximately half that of the no-deal scenario.”