Worst-case scenario Brexit deal could cost Irish economy €18bn, report finds

Theresa May speaks at the Security Conference in Munich

Theresa May speaks at the Security Conference in Munich

An independent study carried out by Copenhagen Economics for the Government paints a bleak picture where, even in a best-case scenario, Irish GDP will be 2.8% lower compared with an alternative situation in which, by 2030, the United Kingdom had not left the EU.

"If the United Kingdom wants continued access to the European Union market, the European Union must insist that the United Kingdom will not be free to open their markets to low standard or low value products from outside the European Union", he said.

That European Economic Area (EEA) scenario, similar to the type of arrangement which now operates between the EU and Norway and Iceland, would see a 3.3% drop in exports and a 3.5% fall in imports. The study proposes that an EEA scenario would be least damaging, gradually reducing GDP growth by 2.8% by 2030, while a World Trade Organization scenario would have the most impact, gradually reducing GDP growth by 7% by 2030.

These difficulties, combined with extensive uncertainties about the Brexit end-state and the process to get there, are leaving most interviewees increasingly anxious about the impact of Brexit on their businesses. The report states that 82% of employment in agri-food, the beef sector and the dairy sector are outside Dublin - and all three face a Brexit impact to exports and production which far exceed the national averages.

The study does not suggest the Irish economy would shrink in absolute terms. They are agri-food, pharma-chemicals, electrical machinery, wholesale and retail, and air transport.

The rise of non-tariff barriers, specifically due to regulatory divergence, is the main factor driving the results.

"Understandably, there has been much focus on ensuring there is no hard border in Ireland".

It acknowledges that government intervention - through measures such as trade promotion policies - could mitigate the damage to the economy.