#Budget2020: No one knows whether the Brexit millions will be enough

#Budget2020: No one knows whether the Brexit millions will be enough

It's the right thing to do under the circumstances but no one knows whether the €1.2bn Minister for Finance Paschal Donohoe says he has ringfenced to alleviate the worst effects of a crash-out Brexit will be enough.

In the coming weeks businesses up and down the country will seek to understand the terms and conditions on ways to tap the Brexit supports, in the event the British government pulls the trigger to leave the EU without a deal.

The most vulnerable firms and thousands of people in the most exposed regions face a terrible period of uncertainty.

The first question is whether the €1.2bn package of measures (or €650m which is probably a more accurate price tag of the underlying measures detailed by the finance minister) can go anywhere to offset the shock that a crash-out Brexit entails for the Irish economy.

Another question involves the staging of the Brexit announcement in yesterday’s budget — a setpiece political event.

That decision was probably not the best way to go about the process and raises questions about the timeliness of the announcement of incentives to businesses.

It was a curious decision to use a budget speech to announce measures to alleviate the worst effects of a Brexit just weeks before the first potential date that a crash-out could occur.

Discussions over the size and ways to deliver the funds could have been done in the open many months earlier.

The timing probably shows that Government advisers agree with currency markets and other financial market investors who have wagers that the outcome of Brexit on October 31 is unlikely.

The announcement by Finance Minister Donohoe of the package nonetheless signals that the risk of the UK crashing out in the coming months remains substantial.

According to UK opinion polls, Boris Johnson could yet secure a majority in Westminster with the help of the Brexit Party and the DUP in a general election in the near future.

The debate about the menu of potential measures has been absent right up to the budget speech but the scale of the measures announced by Mr Donohoe may hit the right note after all.

The announcement could help shore up battered confidence in many firms, providing reassurance that they will not stand alone to face up to the Brexit hurricane.

The problem is that all types of firms exporting and importing across the Irish Sea have been affected by Brexit for some time.

Sterling was and remains the main barometer to measure the harm that the UK is causing itself by even considering putting distance between itself and the huge European market on its doorstep.

The slide in the value of sterling from around 72 pence on the eve of the June 2016 vote was rapid and alarming.

As they say, no country gets rich by devaluing its currency.

The plunge in the UK currency signalled the economic harm that the British were inflicting on themselves.

Famously, voters working in English factories whose long-term livelihood are linked to building cars from car parts brought back and forth across the North Sea from mainland Europe may also have enthusiastically backed Brexit.

And listening into the Brexit debate raging in the UK over the last three years was mostly about politics in England, and very little on economics.

Over this side of the Irish Sea, the economics of Brexit is a big deal to the economic wellbeing in Ireland — north and south.

The Brexit effects have long weighed on parts of the Irish economy through the plunge in the value of the UK currency.

Official figures have tracked the decline in the numbers of British tourists crossing the Irish Sea, for instance.

And a sudden plunge in sterling also put at risk profit margins of many small exporters selling goods and services into the UK.

From an early stage, the research showed that Ireland was the most exposed of all EU countries to the fallout of Brexit.

Over the three years since the UK voted to leave the EU, researchers at the Economic and Social Research Institute and the Central Bank have mapped in astonishing detail the sectors that are most vulnerable.

In broad terms, it is Irish-owned food-processing firms and farmers that are the most exposed to the tariff walls entailed by the UK crashing out of the EU.

By geography, the most exposed towns run up from north Cork through the Midlands and the West and across the North.

The ESRI has recently warned that the uncertainties are so great that a crash-out would mean the economy contracts next year.

Edgar Morgenroth, economics professor at DCU, warns that the costs to the State will be substantial once jobs are lost.

He cites the example of some German federal states which intervened during the financial crash by helping businesses to run on four-day weeks, by subsiding employment.

The purpose of Germany’s official support was to do everything to get companies through the crisis and keep the doors open and preserve jobs.

Brian Keegan, public policy director at Chartered Accountants Ireland, says that no one knows whether the budget Brexit measures will be enough such is the unprecedented nature of the threat facing the Irish economy.

He cites the fate of New Zealand which plunged into recession when it was cut off from its main export markets when the UK joined the European Common Market in the 1970s.

The threat of Brexit has again exposed the weaknesses of the Irish-owned firms.

For decades, they have complained about Government policies that have promoted multinationals.

The multinationals did help keep thousands of people in work during the worst of the financial crisis.

The Government has also tapped and unwisely spent much of the huge windfalls in corporate tax revenues that the multinationals delivered to the exchequer in recent years.

Irish SMEs are now in the front line and will need to be treated much better regardless of the outcome of Brexit.

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