Brexit ‘will damage North’s economy’ with or without backstop

The North will be badly hit by the United Kingdom's departure from the European Union regardless of whether Brexit is hard or soft, or includes a backstop, new research has found.

The report from Fraser of Allander Institute at the University of Strathclyde suggests Brexit could lead the North’s economy to shrink by 3 per cent and to generate up to 18,500 fewer jobs over the long term.

Even with a backstop arrangement in place, the Northern Ireland economy is likely to weaken by 1.3 per cent, according to the research. In the worst-case scenario, it would shrink by 2.7 per cent compared to where it would be if Brexit did not happen.

In the report, commissioned by the North’s Department for the Economy, researchers set out the potential long-term trade impacts of several possible EU exit scenarios solely related to Northern Ireland. The researchers did not take into account the economic consequences of Brexit on the UK economy as a whole.

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Their report examines hard and soft Brexit scenarios and also different approaches to various backstop arrangements, including where only Northern Ireland would follow single market rules but the North, Britain and the EU would continue to share a common customs market for goods.

The researchers at the Scottish institute conclude that “all Brexit options will negatively impact the Northern Ireland economy” and that a hard Brexit would be the most damaging of all.

The North’s Department for the Economy said this analysis suggests that as a result of “export and import shocks” under the no-deal Brexit scenarios examined, there could be between 15,000 and 18,500 fewer jobs across the Northern Ireland economy in the long run.

“These impacts would be felt most acutely within the wholesale and retail sector [that could have 5,000 fewer jobs] as well as agriculture and the food and drink sectors [that could have 3,000 fewer jobs].

“Those impacts would also spread beyond industry and impact on wages, incomes and households. In the long run wages could be up to 3.7 per cent lower in real terms, equivalent to around £1,000 (€1,117) per year for the typical worker,” said the department.

Smaller economy

The new report from the Scottish body also finds that 15 years after Brexit, the North’s economy would be 3.3 per cent smaller than it would have been otherwise, exports would be 11.8 per cent lower and investment levels would be 4.2 per cent weaker.

The researchers noted that the most affected sector would be food and drink which could lose approximately £225 million in revenues in the 15-year period post Brexit – based on the direct reduction in export demand and the increased cost of imports needed for production.

Overall, the research team concluded that the long-term impact of a soft Brexit – where Northern Ireland and Britain remained part of the European Economic Area– would be less harsh.

But they also agreed that 15 years after Brexit the North’s economy could still potentially have slipped back by 1.1 per cent.

In their executive summary they state: “The scenario where the backstop endures in part to Northern Ireland and Great Britain separately signs free trade agreement represents the most negative scenario after a hard Brexit.”