Michael Noonan: Brexit has no impact on next budget

The knock-on economic consequences from Brexit are unlikely to impact on the next budget but could reduce public spending power in future years, Finance Minister Michael Noonan has said.

He also confirmed that a predicted drop in economic growth because of Brexit, forecast as up to €3bn in the recent summer economic statement, was now being reviewed.

The minister said Britain’s decision to leave would have “little or no impact” on the forthcoming budget in October for 2017 but may affect future ones between 2019 and 2021.

He said Brexit would have an impact, as had been set out in last week’s summer economic statement. This suggests there could be a drop of up to 2% in GDP, which could potentially amount to over €3bn. This figure was confirmed by MEP Brian Hayes yesterday.

However, Mr Noonan said it was difficult to calculate what exact damage to the economy might be done. This would depend on a number of factors.

“The way stirling and the euro moves against the dollar, we’re only on the first half of day one, and it’s impossible to do any realistic calculation at present.”

Asked about any potential advantages of Brexit for Ireland, Mr Noonan admitted there could also be good sides to the result.

“There may be upsides if there was a transfer of activity from the City of London to Dublin, for example, or if there was a transfer of foreign direct investment from the United States to Ireland, as against the UK.

“But I can assure people that because of the complexities of calculating the fiscal space, the amount of resources available for the budget, this will have little or no impact on the forthcoming budget in October for 2017. But it may have some impact in budgets towards the end of the budgetary cycle as we move beyond ‘19 and ‘20 and ‘21.”

The International Monetary Fund yesterday released a statement following a recent post-bailout visit to Ireland, warning of potential economic difficulties for Ireland after Brexit.

“In particular, the vote in the UK to leave the EU, if accompanied by a marked slowdown in the UK and in the rest of Europe and a surge in financial market volatility, would have a significant adverse effect on Ireland in light of the strong trade and financial linkages with the British economy,” it said.

However, ratings agency S&P yesterday issued an opinion that Brexit would not have an “immediate impact on Ireland’s sovereign ratings”. Mr Noonan said he welcomed the statement.

The NTMA said it would monitor developments in the bond markets. However, Ireland’s funding position was strong due to the activities in the first six months of 2016 and the fact the treasury agency had “limited financing needs” for the rest of the year.