Makhlouf warns all Brexit outcomes damaging for Ireland

The Irish Central Bank’s new governor, Gabriel Makhlouf, warned on Thursday that all the outcomes of the UK leaving the EU were damaging for the country’s economy, especially a no-deal Brexit.

The comments, made to students at Dundalk Institute of Technology, come as the Irish Government, European Commission, UK parliament and members of parliament throughout the EU begin to assess British prime minister Boris Johnson's exit plan, submitted to Brussels on Wednesday.

"The fall in the value of sterling has been the main channel which we have seen the economic effects of Brexit act to date, and I am sure this has already had an impact on many of you and your businesses," said Mr Makhlouf. "Any form of Brexit will be damaging for Ireland, with a 'no-deal' Brexit especially so."

Sterling has plunged 16 per cent to about 89p against the euro since UK voters decided in June 2016 to quit the EU.

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"The real effects of Brexit will, of course, only be known once the UK leaves the European Union, and, fundamentally, the manner in which they depart," said Mr Makhlouf.

Mr Johnson's proposals to replace the Northern Ireland backstop would mean the six counties leaving the EU customs union – the bloc's tariff-free trading area – but remaining aligned with the EU's single market rules, the bloc's uniform set of standards, for all goods including manufactured as well as agricultural and food products.

There is little expectation in Brussels and Dublin that it will lead to a deal before the UK is scheduled to depart from the EU at the end of this month. The EU’s base case is now said to centre around another Brexit, which was originally scheduled for the end of last March, being delayed again.

Two economies

“After many years of close integration between the two economies as part of the EU, businesses and the Irish economy will need to adjust to new trading arrangements,” Mr Makhlouf said.

He said the Central Bank’s focus since the Brexit referendum in 2016 had been to ensure that “financial stability and consumer protection risks are identified and mitigated to the greatest extent possible”.

“This is particularly pertinent for the ‘cliff-edge’ risks associated with a hard or no-deal Brexit.”

Various reports from the bank in recent months have warned that a no-deal Brexit could result in 100,000 fewer jobs being created in Ireland over the medium term; economic growth slowing to 0.7 per cent next year; and one-third of farms being forced out of business.

“We have also been working to ensure that regulated firms deliver on their responsibilities of preparing appropriately for these risks,” said Mr Makhlouf.