Mr. Dan O'Brien:

I thank the committee for the invitation to appear here. It is a privilege for the institute and for me personally to address the committee. As a small country, strong rules-based arrangements with our neighbours are an eternal Irish interest. For more than four decades, the EU has provided such an arrangement with our closest neighbours. The departure of the UK from the Continent's most important political and economic institutions will bring to an end to a period in which the external environment has been as close to ideal for this State as could ever realistically be imagined in international affairs. Brexit will result in Ireland being pulled between the State's closest neighbour and the continent which is vital for our prosperity. The consequences are multiple, almost all of which are negative, not least for employment. Even if the opportunities are maximised, they will only partially offset the damage caused by the others.

I will focus on three issues in these opening remarks: currency, trade and investment. Irish exporters, and in particular indigenous Irish exporters, watch the euro-sterling exchange rate very closely because an adverse movement can wipe out their profits and threaten their businesses, as has happened to some companies already. Many things determine exchange rates but over the longer term, the economic outlook of an economy is among the most important factors. As there is overwhelming agreement among economists that Brexit will be bad for the British economy, the fall in sterling since the June referendum is unlikely to be reversed over the foreseeable future. This will make Irish made goods and services more expensive in the UK and require even more effort by businesses here to cut costs and remain competitive. This will negatively effect Irish employment levels and the only real question is by how much.

Brexit will reduce Ireland-UK bilateral trade over the longer term. Again, the only real question is by how much. Economists are almost universal in their agreement that the more barriers that exist to doing business, the less business that ends up being done. The UK's departure from the EU will mean new barriers to cross-Border commerce between the EU and the UK. If, as is increasingly likely, the UK leaves the single market when it leaves the EU, these new barriers will be considerable. This will impact much more on Ireland more than the other remaining 27 EU member countries, something illustrated by the relative importance of Irish trade with the UK. In 2014, before a very significant revision of Irish GDP, the value of Irish goods and services exports to the UK amounted to 17% of Irish GDP. This was the second highest among the EU-27 in respect of exports to the UK. For most other EU countries, exports to the UK are in low single digits relative to GDP. If Brexit was to result in a one-quarter decline in Irish exports to the UK, it would cause a very sharp slowdown in the economy here. If the economy was already growing slowly when the impact is felt, a recession would be all but inevitable.

Brexit will cause companies to change their investment decisions. This will result in both Irish jobs moving to the UK and British jobs moving to Ireland. Among the most traditional motivations for foreign direct investment is to jump over trade barriers that exist between countries. Rather than exporting from, for example, the US to Europe and paying tariffs, US companies over the decades have set up subsidiaries on this side of the Atlantic. This has allowed them to service European markets while avoiding costly tariffs. The higher the new barriers to trade between the UK and Ireland are after Brexit, the more likely it is that companies based in Ireland that service the UK market will have reason to relocate at least part of their operations into the UK. Such barrier jumping will lead to job losses in Ireland. Yet again, the only real question is how many.

However, jumping trade barriers works both ways. While Ireland stands to lose some jobs, it also stands to gain jobs from the UK as a result of Brexit. This is the only real upside for Ireland from the UK departing the EU. There are two broad potential sources of jobs. They are British companies that service the EU market and foreign companies in the UK that service the same market. As the UK has the second highest stock foreign direct investment in the world and much of that investment is EU-focused, there are considerable opportunities for Ireland. Both types of companies are likely to look to Ireland as an EU location into which investment and jobs can moved to secure Single Market access.

There are many other dimensions to Brexit that will be damaging to Irish economic interests. For instance, it is likely to make the EU less open to the world, something of particular concern to Ireland given its unique place in the transatlantic economy. It is also very likely to make the EU less liberal internally. The loss of a large partner with similar interests and perspectives on many economic policy matters will make the EU a less comfortable place for Ireland.

In conclusion, despite the opportunity to attract jobs from the UK, the other foreseeable changes flowing from Brexit are negative for the Irish economy and employment. The net costs, if indeed the UK does leave, will be large and felt over the very long term.