Brexit would inflict immediate and profound economic shocks on Ireland, hitting households, businesses and government finances, according to a study.
Britain’s departure from the European Union, with or without a deal, would cause significant damage to jobs and economic growth, the Economic and Social Research Institute (ESRI) said in a comprehensive report published on Tuesday.
A decade after Brexit, Ireland’s output would be 2.6%, 4.8% or 5% lower than if Britain had stayed in the EU, it said, painting a stark picture as policymakers in Dublin try to grapple with a possibly imminent blow.
A disorderly no-deal Brexit would mean 80,000 fewer jobs being created in Ireland over a decade, derailing the government’s budget planning, said the thinktank, which works closely with the Department of Finance.
If Britain departed with a deal – the most benign scenario – 45,000 fewer jobs would be created, it found.
Damage from a managed no-deal departure, a third scenario, would lie between those extremes.
Both no-deal scenarios envisage sterling dropping around 7% against the euro over a decade, leading to higher import prices for consumers.
“The impact of each Brexit scenario is considerable and will have negative effects throughout the economy on the household sector, the labour market, firms and the public finances,” said the report’s lead author, Adele Bergin.
“Overall, in each scenario, the level of Irish output is permanently below where it otherwise would have been were the UK to decide to remain in the EU. However, the negative impact on Irish output in the long run in the deal scenario is approximately half that of the no-deal scenario.”
The report will fuel alarm in Dublin.
“As every day passes, no-deal does become more likely,” Leo Varadkar, the prime minister, said on Monday. “So we’re intensifying our no-deal preparations. They have been very much under way now for months, if not years. They are being intensified and finalised at the moment. We need to see now what happens in Westminster over the next couple of days and weeks and we’ll take it from there.”
With Westminster in flux over the fate of Brexit, some Irish officials say Dublin’s projected image of readiness belies deep anxiety verging on dread about what may unfold.
Ireland exports €4.5bn (£3.8bn) worth of food and drink a year to the UK, ranging from beef to cheddar cheese. It imports €33bn (£28bn) worth of products from the UK – more than China – leaving Irish consumers and companies vulnerable to disruption.
Opposition parties have broadly supported Varadkar’s Brexit strategy but are preparing to pounce if a shock hits.
Michael McGrath, a finance spokesperson for the main opposition party Fianna Fáil, said the ESRI report exposed the “folly” of Varadkar recently promising tax cuts.
“This was an irresponsible promise to make in light of the deep uncertainty facing our country at this time as a result of Brexit … the key point is that the estimated impact on Ireland is worse than was previously thought.”
Katie Daughen, the head of Brexit policy for the British Irish Chamber of Commerce, said big companies had the resources to prepare for Brexit and small companies had the nimbleness to respond to whatever happened, but medium-sized companies were vulnerable.
The agri-food sector and importers who depended on raw materials from the UK were especially exposed, she said.
The weakened pound is already affecting tourism. Trips by residents of Britain to Ireland fell to 258,100 in February, a 2% dip compared to last year. The number of tourists from the rest of Europe grew slightly.
