Brexit would be a blow for Ireland

The CEO of Ibec, Danny McCoy explains the potential implications a Brexit could have on Ireland.

The people of the United Kingdom will make a hugely important decision on 23 June when they vote to remain in or to leave the European Union. Ibec strongly supports continued UK membership of a strong, forward-looking and globally competitive EU. The European Union’s standing on the international stage would be diminished by a Brexit, resulting in it no longer being the world’s largest economic block. The loss of the dynamic UK economy and potentially the biggest country in Europe, within a generation, would have serious negative impacts on the EU’s future growth prospects.

However, despite the strength of the arguments to remain, the polls suggest that the vote is too close to call. If the people of the United Kingdom do vote to leave, the impacts on Ireland will be greater than for any other EU member state. A vote to leave would demand an immediate, considered and sophisticated response by the Irish government to minimize instability and ensure Irish interests are safeguarded in any subsequent negotiation and settlement.

Ibec’s report on the potential impacts of a possible Brexit highlights five major impacts for Ireland:

• Trade disruption: Brexit would result in years of uncertainty as the UK negotiates a new agreement with the EU, involving higher costs for business, new customs procedures and regulatory divergence emerging over time. Trade flows between Ireland and the UK could fall by 20 per cent in a worst case scenario. The impact would vary from sector to sector, with those with a high proportion of exports to the UK market, such as the food sector suffering the most. The UK accounts for €2 billon or 55 per cent of meat exports and €1 billon or 30 per cent of dairy exports from Ireland.

• Sterling devaluation: Already sterling has fallen significantly due to concerns over a possible EU departure. After a vote to leave, the sterling/euro exchange rate could weaken by a further 10–15 per cent moving close to parity and leaving Irish firms selling into the UK market much less competitive.

• Investment uncertainty: Dublin could benefit if some corporate activity relocated from the UK to the EU, but on balance the risks outweigh any possible advantages. Ireland benefits if our nearest neighbour and close competitor has to abide by the same rules, within the EU.

• Undermine all-island economy: While the level of trade with Northern Ireland is less important than it used to be, any disruption to cross boarder commercial activity could have a very destabilising effect on the governance and economy of Northern Ireland.

• Energy and Climate Change: Ireland shares a wholesale all-island electricity market and while the impact of a Brexit might appear benign it could impact on where stocks of liquid fuels are stored for security of supply reasons.

In summary, a UK departure would be a blow to the Irish recovery and result in a protracted period of uncertainty for business. It would undermine Europe’s ability to act collectively and decisively in the world. The UK and Ireland have been close allies in Europe across a wide range of areas and an EU without the UK would be a lesser Union. Even if the UK votes to remain in the EU, its relationship with the EU is altered by the decision negotiated between the EU and UK last February. Ireland will need to keep a close eye on how this agreement is implemented and the potential impacts for Irish business.