Republic foresees “strong consequences” of Brexit on Irish economy as border worries rise

Nathanael Williams

Irish Government worries about exposure of manufacturing and financial sectors to UK plummet

THE REPUBLIC OF IRELAND (ROI) has published a report called “UK EU exit – An exposure analysis of sectors of the Irish economy” showing the potential for a “strong negative” impact on the Irish economy.

As the Irish Government enters negotiations with the UK government and Northern Ireland parties over the terms of trade and border control, figures show how exposed the Irish economy is to a prospective “hard Brexit”.

According to government figures, the top five most exposed manufacturing sectors in the Republic collectively account for 75 per cent of the gross value of manufacturing and 94,000 employed persons.

“The separation of the UK from the EU could lead to an increase in tariff and non-tariff barriers that would have a negative impact on sectors in Ireland which export to the UK.” Donal Smith

In a statement Donal Smith, Mike Fahy, Brian Corcoran and Brendan O’Connor who are economists from the department of finance, said: “Due to Ireland’s close economic and financial linkages with the UK, the Irish economy is likely to be affected by the consequences of the UK departure from the EU over the medium term.  

“The severity of the impact is, however, difficult to gauge at this stage. Crucially, it will depend on what path the future relationship between the UK and the EU takes, especially regarding trade, financial flows, and the movement of labour.

“For example, the separation of the UK from the EU could lead to an increase in tariff and non-tariff barriers that would have a negative impact on sectors in Ireland which export to the UK. In addition to the exporter impact, trade barriers could cause disruption to the global production networks that characterise many modern industries, making it more costly for sectors to source inputs.”

Figures showing percentages of Irish exports in each sector that go to the UK 

Total ROI exports of goods to the UK were €15.5bn during 2015, or 14 per cent of total goods exports but if the UK is shut out of the single market these trade connections may be put in jeopardy.

The top five areas of business and industry most exposed to a “hard Brexit” are pharma-chemical, food & beverage, manufacturing, materials manufacturing, and electrical equipment. Three of these sectors, food & beverage and traditional and materials manufacturing, each import over 45 per cent of their production materials from the UK.

Table showing sectors with highest exposure to UK markets in event of Brexit

In the report, the economists expressed concern that this “lack of diversification” in import sourcing could spell danger if a hard border and tariffs were introduced between the UK and EU.

It also draws attention to the fact that of many of the most exposed sectors of the Irish economy are in the Border region which have a higher share of total employment.

It has been pointed out by members of the UK Government that Scotland is itself intimately entwined with the UK in terms of imports and exports; meaning that independence would bring economic challenges. However, the Scottish Government has maintained that Scotland’s share of exports to the EU has grown since 2013 with 42 per cent of Scotland’s international exports destined for countries within the EU estimated at £11.6bn. 

Picture courtesy of the Irish Government

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