The coincidence of the hit to the economy from Covid-19 and the risk of the United Kingdom leaving the European Union trading regime at the end of year without a deal are, correctly, concerning the Government. Briefing papers drawn up for Minister for Foreign Affairs Simon Coveney warn of the difficulty of households and businesses absorbing a second shock, in the midst of the ongoing economic impact from Covid-19. It is a threat, in particular, for rural Ireland.
It is hard to believe that, in the middle of the Covid-19 crisis, we might still be facing a kind of hard Brexit at the end of the year. The UK has already left the EU, of course, but is in a one-year transition period when it remains in the EU trading bloc and many associated agreements continue in place. This all ends on December 31st and the UK decided not to extend the transition period.
Even if there is a deal, there will be disruption for Irish companies trading with the UK, involving new bureaucracy and, initially, quite probably delays and some uncertainty.
For Northern Ireland, a special regime – outlined in a protocol agreement – has to bed in and there is, as yet, a lack of detail as to how this will operate in practice.
If there is no new trade deal between the UK and EU, the damage to the Republic’s trade with Britain would be worse and the Northern Ireland protocol will be more difficult to implement.
A lot of work went into planning for a hard Brexit last year, so some preparation has been done. The problem is that since then the economy has been faced a massive economic shock, depleting the resources and leeway in the finances of businesses and some households. As the civil service briefing warned, Ireland is now “facing into Brexit from a fundamentally different economic starting point than for a no-deal Brexit in 2019”.
While the officials are correct that protecting the €85 billion trade link with the UK is important to our economic future, short-term damage would inevitably worsen in the event of no trading deal being reached.
In particular, the imposition of tariffs on trade, particularly on food products, threaten a big hit to Irish food exporters and higher prices in the shops here. Beef exports, and thus cattle farmers, are particularly exposed.
The Covid-19 crisis is impacting heavily on parts of rural Ireland which, unlike the main cities, do not have many other big employers to soften the blow from losses in tourism and hospitality. Another sector vital to rural Ireland – agriculture and food – faces the biggest threat from Brexit. We can only hope that, even if late in the day, some kind of Brexit trade deal is agreed which, as the briefing to the Minister concludes, will require movement on both sides, but more particularly from the UK.