Ireland & the impacts of Brexit
Ireland & the impacts of Brexit
Ireland is uniquely exposed to Brexit due to a very high trade intensity with the UK. Approximately 15 per cent of Irish goods and services exports are destined to the UK. In certain sectors, the UK is an especially important market, such as the agri-food sector where around 40 per cent of exports are destined for the UK. In addition, two-thirds of Irish exporters make use of the UK landbridge to access continental markets.
The report analyses how changes in the EU-UK trade relationship could affect the Irish economy. The report quantifies how different types of EU-UK trade scenarios could affect Ireland’s trade with the UK and other trading partners. Finally, the analysis provides an assessment of the related macro-economic impacts as well as sector impacts for Ireland for a range of scenarios with different combinations of tariffs and other trade costs for EU-UK trade.
In all scenarios, Brexit will have negative impacts on Irish trade with adverse knock-on effects on Irish production and ultimately Irish GDP. The main conclusions of the study are:
Increased trade costs will lower Irish exports of goods and services by approximately 3-8 per cent in 2030.
Brexit will lower Irish GDP by approximately 3-7 per cent in 2030.
The following five sectors account for the vast majority of the total impact of Brexit: Agri-food, pharma-chemicals, electrical machinery, wholesale and retail and air transport.
The findings are based on in-depth modelling and extensive stakeholder engagement. All scenarios and analyses contained in the report assume “no policy change” – i.e. before any mitigating actions are taken by the Irish Government. The study concludes that domestic policy responses can mitigate Brexit impacts.
The study is commissioned by the Department of Business, Enterprise and Innovation, for the Government of Ireland.
In brief
Brexit reduces Irish GDP in every scenario modelled, from 2.8 per cent below the non-Brexit baseline in 2030 under an EEA arrangement to 7.0 per cent under WTO terms, worth around EUR 18 billion on a 2015 basis.
-2.8 to -7.0The potential effect in per cent on Irish GDP in 2030 against a non-Brexit baseline, ranging from the EEA scenario to the WTO scenario, with customs union and FTA scenarios both at -4.3 per cent.
EUR 18 bn What a 7.0 per cent fall in GDP corresponds to on a 2015 basis.
-7,7 per cent Fall in total Irish exports of goods and services under the WTO scenario, with imports slightly more affected at -8.2 per cent.
-8,7 per centFall in real wages for low-skilled workers under the WTO scenario, against -6.5 per cent for high-skilled workers.
15 per cent Share of Irish goods and services exports destined for the UK, rising to around 40 per cent in agri-food. Two thirds of Irish exporters also use the UK landbridge to reach continental markets.
Prepared for the Department of Business, Enterprise and Innovation, Government of Ireland, with a steering group including the Departments of Agriculture, Food and the Marine, Finance, and Public Expenditure and Reform. With contributions from Professor Alan Matthews and Professor Joseph Francois. Published February 2018. Projections to 2030 against a non-Brexit baseline. Ireland.
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About this analysis
Copenhagen Economics assessed the strategic implications for Ireland of changes in EU-UK trade and investment after Brexit. Four long-term scenarios were modelled against a 2030 non-Brexit baseline: EEA, customs union, free trade agreement and WTO terms, with two further short-term scenarios against a 2020 baseline. The estimates come from a computable general equilibrium model, supported by analysis of Irish trade data, a review of existing Brexit studies, and interviews with stakeholders across sectors.
All scenarios and analyses assume no policy change, meaning they are modelled before any mitigating action by the Irish Government. The WTO figure of 7.0 per cent assumes UK regulation diverges to the full extent seen with non-FTA partners. The customs union impact could be reduced from 4.3 to 3.4 per cent if political agreement minimises customs procedures.