The Financial Times estimates that the cost of Brexit to the UK economy could be anything between 1% and 9% of national income or between £20 billion and £80 billion, depending on whether it is a hard or a soft Brexit. Dr. Charles Larkin reports that the Brexit cost to the UK household is between £2,200 and £5,000(Source: Abrivia Salary Survey 2018). This is extremely significant when one considers that the average salary for a male worker in the UK is just over £30,000 and the average salary for a female worker is £25,143 (Source: Monster UK). The UK government in leaked documents reckon that combined trade deals with China, USA, India Australia, the ASEAN bloc and Gulf states will only add a mere 0.3% to 0.6% to UK GDP in the long run. This is depressingly a far cry from the potential 9% drop in GDP resulting from a hard Brexit. Despite bravado emanating from certain UK political circles, from the evidence above, Brexit is indeed an exercise in economic self-sabotage.
More importantly, how could Ireland be affected by this act of economic self-harm?
According to the Abrivia Salary Survey 2018, Ireland could face a GDP decrease of between 3.4% to 9.4% over a decade due to a hard Brexit. This has the potential to spell major difficulty for Ireland’s export sector as Ireland exports around 17% of GDP to the UK, which in monetary terms equates to a whopping €39 billion. The Abrivia Salary Survey 2018 found that 42% of firms believe that their supply chain will be disrupted as a direct result of Brexit. For example, the Beef sector in Ireland employs over 120,000 people and exports 50% of its production to the UK. Cheddar cheese exports to the UK are at 78,000 tonnes and represent 2/3 of all production. Sheep meat exports are equally focussed with 21% going to the UK. The list goes on and on.
However, it does not need to be all doom and gloom. Irelands financial sector has already received a boost from financial firms relocating from London in anticipation of Brexit. Dr. Brain Lucey points out that there is huge potential for export growth to India and sub Saharan Africa, which the OECD have predicted will experience phenomenal economic growth in the next 25 years (Source: Abrivia Breakfast Briefing 2018). Also, one must remember that Brexit has not occurred yet and the potential for a second Brexit referendum or a soft Brexit still exists. The dynamics of Brexit negotiations are changing daily. However Irish firms should still invest in a contingency plan should our worst fears materialise. The adage of “Hope for the best, plan for the worst” comes to mind.