There have been talks of a referendum regarding whether or not the UK should leave the European Union for the majority of the year. Under the European Union Referendum Bill 2015, this referendum should take place no later than 31 December 2017.
In a report published today, researchers from the ESRI examined the UK’s proposed exit from the EU, and the impact it would have on our economy. Scoping the Possible Economic Implications of Brexit on Ireland looks at four main areas that could be impacted by the movement of the UK out of the EU. They are:
- Foreign direct investment;
- Energy; and
The report, which was undertaken as a joint effort between the Department of Finance and the ESRI Research Programme on the Macro-economy and Taxation, found the following setbacks and opportunities would come from Brexit.
Trade flows between us and our nearest neighbour could be stunted by 20%. Indigenous firms will suffer most, as the UK is their largest export destination. British imports are a larger market segment than exports, and thus the lack of Single Market would impact negatively on the cost of those imported goods. Northern Irish exporters, in particular, who are exporting to Ireland will suffer greatly.
In Foreign Direct Investment
The lower rate of FDI in the UK could contribute to slower economic growth, which would have a knock on effect for the Irish economy. Ireland would not necessarily profit much from the UK’s loss of FDI, as we already have a high level, and we are set apart from the continental EU. Larger countries such as Germany and Spain’s chances of increased FDI would be much greater than Ireland’s.
Northern Ireland currently rely on the Republic to meet its energy needs, as its production capacity is too low. With increased trade barriers, this may lead to problems for their energy market. Irish customers would benefit from an energy interconnection between us and the EU, but the process could be costly.
Irish people, especially in times when unemployment is high, have a long history of migrating to the UK to find work. Without free movement between the countries, the implications of the labour market could be immense. A problem also arises with people who were born in the UK but are resident in Ireland, or vice versa; their passports may be from the country where they are resident, and not reflect their birthplace, and this could call into question residency rights in the event of Brexit. Further, the report poses that any border controls imposed between the Republic and Northern Ireland could set back relations that have not long settled, calling the measures “a worryingly regressive step”.
In conclusion, the report finds that Ireland would profit most from the UK remaining in the EU. Notably, the tenuous relationship between the Republic and Northern Ireland would benefit most from the UK remaining a member state.