Brexit impact could be as bad as financial crash

Brexit’s impact over the next decade or longer could be as bad as the financial crash on lives and the economy.

That was a warning from the Economic and Social Research Institute also predicted that the biggest differences after Brexit may be felt in households and regional areas around the country.

The economic think-tank, which advises the Government, was making predictions about the impacts on trade, household budgets and public finances in the event of a Brexit deal or if Britain crashes out of the EU.

Quizzed by Sinn Féin’s Pearse Doherty about how a disorderly Brexit could compare to the financial crash in 2008, ESRI research professor Kieran McQuinn told the Oireachtas budgetary committee:

I don’t think you are talking about something like that, but the only point I would make is that the credit bubble collapse was over a relatively short sustained period of time, three to four years, whereas Brexit will impact the economy over 10, 15 [years], possibly a lifetime because of the missed opportunities.

“So if you were to accumulate that up in the long run, it could have the same impact. Certainly, it is a more persistent loss to the economy over a longer period of time than the kind of short and sharp, really bad hit that we took in 2008 and 2009.”

ERSI predictions centre on outcomes for the economy in the event of a Brexit deal, a no-deal or a disorderly no-deal by looking at changes in trade, new tariffs on goods and any foreign investment.

The level of economic output in Ireland with a deal would be 2.6% lower, the ESRI said, while it would be 5% lower with a disorderly British exit from the EU.

For trade, the ESRI said: “The negative trade shock will reduce the demand for Irish exports and Irish firms will be affected by the depreciation in sterling which will reduce our competitiveness.”

It said the worst case scenario with a disorderly Brexit could see exports reduced by up to 8.1%.

And while labour demand in Ireland would reduce in the same scenario by 3.4%, this could translate into 80,000 fewer jobs created in the long run. One of the most substantial impacts in all Brexit scenarios would be on households.

The ESRI said: “For households, the impact of Brexit will be severe. Our results indicate that real personal disposable income, in the long-run, would be 2.2% lower in a deal scenario, 3.9% lower in a no-deal scenario and 4.1% lower in a disorderly no-deal scenario, compared to a situation where the UK stays in the EU.”

Ultimately, this could mean households lose out on almost €900, according to estimates, when faced with a disorderly Brexit.

Mr Quinn also admitted that regional and border areas would be worst hit by Brexit, as opposed to Dublin that may benefit from foreign investment.

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