Brexit was always going to be damaging for Ireland, but if the EU and UK do succeed in agreeing a deal, at least there is certainty on where we are heading. As well as the additional economic damage, failure to strike a deal on the future relationship between the two sides creates significant uncertainty in both the political and economic arena.What are the key differences between a future relationship deal and no deal for Ireland?
1. Irish economic growth: A no-deal Brexit would knock three percentage points off economic growth next year, according to the Department of Finance. This is about €10.4 billion in cash terms. In the longer term, the Irish Fiscal Advisory Council said the hit could be twice that , at 6 per cent of GDP. These kind of forecasts are guesstimates – but it is clear that no trade deal between the EU and UK would increase the costs of Brexit to Ireland and mean they hit more quickly.
2. Trade: The main hit to growth would come through lower exports to the UK, which will leave the EU single market and customs union. This means Brexit will mean customs procedures and costs for businesses, even with a deal.
A no deal would also lead to the imposition of tariffs, or import duties, on Irish exports as they enter the UK market. These would amount to about €1.7 billion according to Irish Government estimates. This would make Irish goods more expensive on the UK market, potentially cutting their market share or leading to pressure to accept lower profit margins.
The highest tariffs are on a range of food products and particularly beef, which could face tariffs of more than 70 per cent, effectively pricing many Irish products out of the UK market. Among the trade endangered would be valuable sales of Irish beef for burgers in UK fast-food restaurants. As well as the cost, the technicalities of organising a tariff regime are hugely challenging for Irish businesses.
The Government has set aside cash in a contingency fund to compensate affected businesses in the budget but has not outlined how it might be applied. New legislation is likely to extend wage subsidy support, available for companies hit by Covid-19, to sectors worst hit by Brexit and other supports are also likely if there is no deal.
3. Consumers: Tariffs are taxes which largely fall on consumers, who would pay as tariffs are also imposed on UK goods entering the Irish market. Together with the costs of customs bureaucracy, tariffs would push up prices in the Irish shops, notably for groceries. An ESRI study estimated that it could add €900 to €1,350 to the cost of living in a year for Irish households, a rise of 2 to 3 per cent. The heaviest burden would fall on poorer households who spend proportionately more on products exposed to tariffs. Online shopping will also change.Amazon has warned EU customers, including those in Ireland, that they may see additional charges at checkout due to VAT and possible import duties being applied. Also, there will be a charge levied for returns, except in the case of damaged or incorrect products.
4. Northern Ireland and the Border: The Northern Ireland protocol is due to apply even if there is no trade deal – this is the agreement to ensure that goods are checked moving between Britain and Northern Ireland, meaning no need for a trade border on the island of Ireland. The UK government had introduced two pieces of legislation which would have undermined parts of the protocol, but has now said it will withdraw the offending parts of two bills, following agreement on Wednesday between the EU and UK on how the protocol would operate. This will reduce fears that a failure to agree on this vital issue would again raise questions about the Irish Border in the months ahead, as the EU will insist that goods entering the single market are subject to proper checks.
5. Delays and disruption: New customs rules have led to fears of delays to trade, even if there is a deal and disruption for business supply chains. No trade deal threatens to make this worse, with additional checks needed and less likelihood of co-operation between the EU and UK to try to smooth things out. A key issue for Ireland is the threat to trade through the landbridge to and from continental Europe via the UK, through which 150,000 Irish trucks move every year. There are fears of major delays, especially at Dover but also at Irish and French ports, causing major disruption to some businesses. More trucks are likely to travel directly from Irish ports to the continent in future, but despite reassurances from Government and new route announcements, businesses are nervous of the cost, availability and additional journey-time.
6. The unknowns: Failure to reach a deal raises a host of other questions. Special measures would be needed to allow planes to continue to fly – these would be agreed, but there could be restrictions facing airlines. Disputes would immediately arise over access to UK fishing grounds, with major implications for the Irish fleet. Co-operation in a range of areas would fall away, leading to questions on regulation, security co-operation and a host of other areas. Financial markets could take fright and if sterling took a drop – as some believe – that would be a problem for Irish exporters. All of this has led to forecasts that the UK would quickly go back to the table with the EU looking for a deal. But we just don't know and others feel an acrimonious and long-lasting falling-out could ensue.
