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'Brexit' could cut Irish/UK trade by 20%: Think tank

The govt estimates that 10% of all workers are reliant on trade with the UK, which is a key trading partner for Ireland

Reuters  |  Dublin 

'Brexit' could cut Irish/UK trade by 20%: Think tank

Trade between Ireland and the United Kingdom could fall by at least 20% if Britain leaves the European Union, with far-reaching consequences also likely in other sectors, an Irish government-commissioned report said on Thursday.

British Prime Minister David Cameron plans to renegotiate ties with Europe before holding a referendum by the end of 2017 and the prospect of a "Brexit" already has Ireland's central bank studying the implications for the Irish economy.

The government estimates that 10% of all workers are reliant on trade with the UK, which as the second-biggest market for Irish merchandise exports and largest for the fast-growing service sector, is a key trading partner for Ireland.

"On the trade side alone, the impact would be greater for Ireland," Edgar Morgenroth, research professor at the Economic and Social Research Institute (ESRI), said on whether a "Brexit" would have a greater impact on Ireland than other EU countries.

"You wouldn't expect 'Brexit' to have a 20% impact on trade overnight, clearly you already have contracts in place and they will change over time but the change will be quite dramatic."

Ireland's government has also outlined concerns over the possible impact on peace in the British province of Northern Ireland, which shares a border with the Irish Republic and is recovering from three decades of bloody, sectarian violence.

The ESRI, which is an independent think-tank partly funded by Ireland's Department of Finance, said the impact of a "Brexit" would depend on the ultimate position that is reached.

But with or without a subsequent bilateral trade agreement, there would likely be a significant impact on trade, it said, as non-tariff barriers such as customs controls, or technical barriers would be reintroduced, putting downward pressure on prices.

Sectors such as agriculture, food and basic metals - which are relatively more dependent on trade trade with the UK - would be particularly exposed, the report said, giving one example that half of all boneless beef exported ends up in the UK.

The report added that there may also be specific tariffs liable on imports from the UK, which accounts for around a third of all merchandise imports, including 100% of all Irish gas imported.

While the ESRI said there was an assumption that some negative effects could be counterbalanced by a positive boost for Ireland through multinationals relocating from the UK, its research suggested the additional attractiveness of Ireland is likely to be small with other EU countries benefiting more.

The possibility of a restriction on the free movement of people could also have a negative impact on the Irish labour market as the UK is an important destination for Irish emigrants, especially at times of high unemployment, while there could also be a displacement of immigrants from the UK to Ireland.

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First Published: Thu, November 05 2015. 05:39 IST