A Comprehensive EU-UK Free Trade Agreement Could Reduce Brexit Harm to the Irish Economy by Half
The Government has published a study, commissioned by the Department of Business, Enterprise and Innovation, which examines the economic impact on Ireland of a potential EU-UK Free Trade Agreement. The report, which was undertaken by Copenhagen Economics, reflects the trade provisions of the Revised Political Declaration for the Future Relationship between the EU and the UK.
The Political Declaration sets out the intent of both the EU and UK to negotiate a comprehensive Free Trade Agreement to replace the current economic relationship. At this point, it represents the best indication of what a future EU-UK FTA will look like.
Previous analysis published by the Department in 2018 found that the economic impact on Ireland of a worst-case Brexit scenario – trading with the UK based on World Trade Organisation (WTO) rules – would reduce Ireland’s projected annual growth rate and result in GDP being approximately 7% lower in 2030 (i.e. the economy would still grow albeit at a slower rate).
Taking the parameters of the revised Political Declaration, this study points to a reduction in GDP of between 3.2% and 3.9% in 2030. Effectively this reduces the level of harm on the Irish economy by half.
Launching the report, Minister for Business, Enterprise and Innovation, Heather Humphreys TD said: “We have always known that Brexit in any form will have a negative impact on Ireland. Nevertheless, it’s important to say that it will not cause a contraction in the economy. The economy will still grow but our estimates show that it will grow 3.2%-3.9% less than it would have done if Brexit had not occurred.”
Discussing the state of play in the Brexit negotiations, the Minister continued: “Huge strides have been made by Ireland and the EU in the first phase of negotiations so far but we still have a long road to travel to conclude an FTA.
“Yes, we have achieved our core objectives of ensuring no hard border between North and South, protecting the Good Friday Agreement, and safeguarding the Single Market as well as our place in it, but we are now heading into complex negotiations on the future trading relationship.
“It would be a mistake to underestimate how challenging that process will be, so I am strongly encouraging businesses to continue with their preparations in the coming period. There is nothing good in Brexit for Ireland so I would urge firms to take full advantage of Government supports.”
While this latest study assesses the specific impact of moving to a new EU-UK FTA, in reality, the Government and firms have been engaged in intensive Brexit preparations which, taken together with new opportunities under recent EU FTAs (e.g. South Korea, Canada, Mexico and Japan), have the potential to significantly mitigate the impacts of the changed EU-UK relationship.
Businesses can choose from various supports including grants and mentoring programmes through the Local Enterprise Offices, Enterprise Ireland and InterTradeIreland, as well as the €300 million Brexit Loan Scheme, the €300 million Future Growth Loan Scheme, customs training initiatives, and the Rescue and Restructuring Scheme. Already this year, the Minister launched a €28 million economic stimulus fund for the border region.
