34,000 fewer jobs after no-deal Brexit, Central Bank warns
Boris Johnson crashing Britain out of the EU at Halloween will lead to a dramatic Irish economic slowdown, result in 34,000 fewer jobs, and see a potential full-blown sterling crisis, the Central Bank has warned.
Its new forecasts are against the backdrop of the election of Mr Johnson as British prime minister, which significantly increases the risk of the UK exiting the EU at the end of October with no transition deal.
It has also led in recent days to a new run on sterling, which piles the pressure on Irish food exporters and small firms.
Economists and business groups have warned that the run on the pound in recent days will hurt Irish business and households, well before any crash-out at Halloween.
Economist Jim Power said: “Once sterling goes over 90 pence, it starts exerting pressure. The impact with a sterling crisis is felt within weeks and not months.”
While a sterling crisis would be bad for the Irish economy and agricultural food firms, as well as Irish banks that lend to companies across the economy, the effects would be most felt in large parts of rural Ireland, said Mr Power, as cities like Dublin, Cork, and Limerick are “somewhat” insulated by the presence of multinationals.
The financial warning came as Taoiseach Leo Varadkar and Mr Johnson clashed on the future of the backstop and the growing no-deal Brexit threat in their first formal phone call.
After six days of no contact which alarmed diplomats on both sides of the Irish Sea, Mr Johnson phoned Mr Varadkar just before 12 midday yesterday for the leaders’ first one-to-one talks.
Despite Government Buildings and Downing St describing the talks as “friendly”, sources said there were no breakthroughs, with Mr Johnson insisting on a deal that “abolishes” the backstop and Mr Varadkar insisting no other options are available.
Mr Varadkar formally invited Mr Johnson for face-to-face talks in Dublin. However, Mr Johnson, who will travel to Belfast today, appeared to snub the invitation by failing to respond, with a senior Government source telling the Irish Examiner: “The ball is firmly in their court.”
The Central Bank warned that a crash-out Brexit would mean Irish GDP growth would slow to a crawl, just 0.7% growth next year, down from a huge 8.2% expansion posted in 2018 — or a still-robust growth rate of over 4% in 2020 if Britain agreed to an orderly EU departure.
In its latest quarterly report, the Central Bank warned a disorderly Brexit will cause “heightened stress in financial markets”, as well as prompting households to cut spending. It could also lead to lower wages.
The report predicts a possible fall in exports due to “an immediate reduction in demand from the UK”, with imports tied up in increased bureaucracy, possibly leading to some shortages of consumer goods, at least in the short term.
Mark Cassidy, director of economics and statistics at the Central Bank, said there would be 34,000 fewer jobs by the end of 2020 than there would otherwise have been and that a no-deal Brexit would “significantly reduce the output of the Irish economy”.
Surveys suggest that Irish firms are already being hit by Brexit fears. Some 42% of SMEs in the Republic and 48% in the North were hit by Brexit, according to AIB, while Bank of Ireland said the prospects of a hard Brexit have “spooked households and firms”.
Economist Alan McQuaid said that “many counties will be in deep trouble” under a no-deal Brexit, while the Irish Exporters’ Association (IEA) warned about the immediate fallout from sterling’s slump.
Simon McKeever, chief executive at the IEA, said: “We note with deep concern the trajectory in the euro-sterling exchange rate over the past 36 hours.”
CONNECT WITH US TODAY
Be the first to know the latest news and updates
