Unemployment would rise by 2 per cent with an estimated 40,000 jobs lost in the event of a hard Brexit, the Minister for Finance has confirmed.
Paschal Donohoe also told the Dáil that "GDP would be almost 4 per cent below what it would otherwise have been in a no Brexit scenario after 10 years".
Pointing out that Ireland would be the EU member state most negatively affected by a “cliff edge” Brexit, he said the agri-food, tourism and manufacturing sectors would suffer the greatest impact, in particular at regional level.
“The shock would likely lead to market volatility, further sterling depreciation and disruption to trade with the UK.
“This would have negative impacts for consumer spending, investment and competitiveness with a potential spill over to the labour market and public finances.”
He also said OECD reports showed a “significant divergence in regulatory standards between the EU and UK would lead to additional economic impacts”.
In addition, there would be significant discontinuity from the abrupt imposition of tariffs as well as customs procedures and other non-tariff barriers.
Mr Donohoe stressed that this outcome was based on no policy changes occurring during the Brexit process. But he said “the best way to deal with a risk is to build up our budgetary capacity and continue to implement the right domestic policies”.
Fianna Fáil finance spokesman Michael McGrath who raised the issue during finance question time, asked the Minister to confirm that the 2 per cent rise in unemployment was equivalent to 40,000 jobs and major impact with the introduction of a shift in the regulatory rulebook.
Mr Donohoe confirmed that the job figures Mr McGrath cited were in line with that 40,000 estimate.
He said a shift in the “regulatory rule book” between the UK and the EU would have at least as big an effect on trade as tariffs would.
“All this points to the UK, the EU and Ireland doing all we can inside the framework of the task force on the UK to come up with a positive trading relationship in the future.”
Mr McGrath asked the Minister to “set out in relation to the possibility of the UK leaving the customs union and WTO terms of trade would then apply”.
And he asked what steps the Department of Finance and Revenue were taking to deal with this. “We’re all working to avoid cliff edge scenario.”
Mr Donohoe said the department was working to “have our national finances in as strong a position as possible in event of exceptional shock in the future”.
They were also increasing capital investment in schools, transport and the road network to build Ireland’s economic competitiveness. He said they were also trying to support industry sectors in “areas of risk”.
