Stephen Donnelly (Wicklow, Fianna Fail)
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227. To ask the Minister for Finance the threats identified by his Department with regard to the responsibilities of his Department as a result of no deal being reached in Brexit negotiations; and if he will make a statement on the matter. [26903/17]

Paschal Donohoe (Dublin Central, Fine Gael)
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On 2nd May, the Government published a comprehensive document on Ireland and the negotiations on the UK’s withdrawal from the European Union under Article 50 of the Treaty on European Union. This document sets out the approach of the Government to the forthcoming negotiations, following the successful campaign to have key Irish issues recognised in the EU negotiation position.

Following on from this publication, work is underway to prepare, at Government level, a further paper on economic implications of the Brexit challenge.  This will draw on the work to date across Departments, which will be developed to mitigate emerging sectorial challenges. These plans will build on ongoing cross-Government research, analysis and consultations with stakeholders, and will reflect the core economic themes of the Taoiseach's speech to the IIEA on 15 February last.  

Ireland’s economic interests lie firmly in a strong and well-functioning EU with continued and unfettered access to the single market. There is a lot of negotiation to be done around trading arrangements.  Our contingency work is examining all scenarios and we cannot pre-empt the outcome at this stage.  We are not under any illusions about the complexity of these negotiations and are engaged in detailed planning to prepare for these.

The Department of Finance has been assessing and preparing for the impact of Brexit since well before the referendum on 23 June 2016. Work was carried out in the Department to assess the potential economic and financial sector implications arising, including the study, published in November 2015, under the ESRI-Department of Finance research programme, entitled 'Scoping the Possible Economic Implications of Brexit on Ireland'. The Department's work has been carried out within the whole-of-Government arrangements overseen by the Department of the Taoiseach.

Since the UK referendum, preparation has intensified across the whole of Government level, including in my own Department, where a Brexit Unit was established in July 2016, within the EU and International Division, to oversee and coordinate this work and to act as a key liaison point with the Department of the Taoiseach, in particular. In addition, the Department of Finance staff complement in the Irish Permanent Representation to the EU in Brussels has been strengthened.  The challenge which we face as a result of Brexit is mainstreamed across all divisions of my Department and this is reflected in business planning. The ongoing work in the Department of Finance continues to examine all scenarios, including the scenario of the UK leaving the EU without an agreement in place.

We know from our own published research that the potential impact on the Irish economy is significant.  The medium to long term economic impacts of a ‘hard Brexit’ with reversion to the WTO trade rules are set out in the November 2016 joint paper with the ESRI ‘Modelling the potential macroeconomic Impact of Brexit on Ireland’. Looking at the effect ten years after a UK exit, a hard Brexit scenario results in the level of GDP being almost 4 per cent below what it otherwise would have been in a no-Brexit scenario.

At the time of Budget 2017, the Department published detailed analysis of sectorial exposure to Brexit across the economy. This showed that the sectors most impacted by Brexit are generally small scale indigenous enterprises, with high levels of regional employment and relatively low profit levels that are highly linked to the rest of the economy. Ireland's exposure to the UK is not isolated to the indigenous sectors, with, for example, pharmaceutical manufacturing, financial and ICT services having a substantial export relationship with the UK. Certain other services sectors such as the indigenous Tourism and Hospitality sector (which is heavily dependent on UK tourists) are equally exposed to the competitiveness challenges posed by currency movements. In line with this sectorial analysis, Budget 2017 contained a number of measures which were a first step to support our economic response to the challenges of Brexit.

It is important to recognise that the full impact of the UK’s exit is only expected to materialise over time. We are at the beginning of a negotiation period and the precise arrangements that will apply after Brexit will depend on the outcome of negotiations between the EU and UK.

Work being done by the Department will be an important input to ensuring that Ireland will be in a position to counter negative economic impacts arising from Brexit , to ensure that Ireland's interests are protected in the upcoming negotiations at EU level and also to seek to maximise opportunities arising in the financial services sector. The Department will continue to monitor the economic impacts, to carry out the necessary analysis and to frame budgetary policy advice in this context.