Bernard Durkan (Kildare North, Fine Gael)
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299. To ask the Minister for Finance the extent to which he has had discussions in the context of the operation of the financial services here post-Brexit; if he remains satisfied that the new emerging situation will not damage the sector here; and if he will make a statement on the matter. [27244/20]

Paschal Donohoe (Dublin Central, Fine Gael)
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I expect the character and composition of Ireland’s international financial services sector is going to fundamentally change in a number of ways as a result of the extensive financial services investments won in recent years, including Brexit relocations and the pipeline of future projects. The industry in Ireland is going to become deeper and more diverse. My Department has been working with other relevant Departments and state agencies, such as the IDA, to fully capture any opportunities for inward investment that emerge through promoting Ireland as a committed English-speaking member of the EU with unfettered access to the EU Single Market, our continued access to EU talent and that of the Common Travel Area, in addition to our pro-business environment underpinned by a strong, fully-independent financial services regulator in the Central Bank of Ireland.

The Central Bank of Ireland has been focused on the impact of Brexit on financial stability, for which it has statutory responsibility, since before the UK referendum. It is working closely with financial services firms to ensure that they have contingency plans in place for the end of the transition period on 31 December, and that they are adequately prepared to cope with the possible effects of Brexit, with as little disruption for consumers, investors and markets as possible. On the basis of its work and engagement across the sector, the Central Bank has been able to assure me that, while some level of market disruption is inevitable, the financial system as a whole should be resilient enough to withstand a hard Brexit and that the most material ‘cliff edge’ financial stability risks arising from Brexit have been largely mitigated.

Furthermore, my Department recently worked with the ESRI on an examination of the sectoral overlap of COVID-19 and Brexit shocks, which found that there is limited overlap in the sectors exposed to the different shocks, and limited connection between the sectors exposed to each shock. In this regard, exposures to Brexit in the area of financial services should not be magnified by additional exposure to Covid-19.

The 2020 Brexit Bill includes a number of measures which will minimise disruption. This includes measures in relation to settlement finality, and to enable UK and Gibraltar insurance undertakings and intermediaries to continue to fulfil contractual obligations to their Irish customers following the end of the transition period.

On Tuesday 22 September the milestone of 100 days left until the end of the transition period passed.  Regardless of the outcome of the negotiations between the EU and the UK on the future relationship, the UK will not have the same access to the EU’s Single Market for financial services that it enjoys today. This will mean change. The Brexit Readiness Action Plan, published by the Government on 9 September, clearly sets out that firms in the financial services sector should finalise their readiness and contingency plans and take necessary actions in accordance with the relevant European Commission guidance. In addition, the Central Bank website contains FAQs on Brexit which are targeted at both financial services firms and consumers. My Department will continue to work closely with the Central Bank of Ireland and the NTMA to monitor the situation as we get closer to the end of transition, and to identify any emerging risks.

Bernard Durkan (Kildare North, Fine Gael)
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300. To ask the Minister for Finance the extent to which he sees the double threat from Covid-19 and Brexit to impact on the economy here; if he remains satisfied that provision can be made to cater for the challenges; and if he will make a statement on the matter. [27245/20]

Paschal Donohoe (Dublin Central, Fine Gael)
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As COVID-19 and a no deal Brexit represent key concurrent challenges facing the Irish economy, the interrelationship of the two economic shocks is an important consideration for Ireland’s short-term economic prospects.  

Accordingly, my Department has, along with the ESRI, conducted an analysis of the sectoral overlap of the COVID-19 and no deal Brexit shocks. The main finding of the analysis is that the overlap of the sectors exposed to the different shocks is found to be limited. The sectors most exposed to both the COVID-19 and no deal Brexit shocks appear to be distinct and relatively unconnected. Having assessed the impact of no deal Brexit and COVID-19 on 57 sectors of the economy, no sector was found to be severely exposed to both shocks. The research also examines interlinkages between the exposed sectors in terms of domestic supply chains. It found that sectors that are severely affected by COVID-19 typically sell a greater share of their output to sectors that are likely to be relatively unaffected by Brexit and vice versa. This implies relatively limited exposure of producers to their customers experiencing one of the shocks while they experience the other shock. Overall, the analysis suggests that while a combined shock from a no deal Brexit and COVID-19 results in a wider range of sectors exposed to risk, the impacts of each shock to the overall economy are not magnified by spill-overs between the two effects. However, it is important to note that as the analysis was conducted at the sectoral level, the impacts may vary at a firm level with some firms possibly facing a double shock from both COVID-19 and a no deal Brexit. Moreover, it is likely that the capacity of businesses and households to manage a second economic shock will be more limited. My Department will publish updated macroeconomic forecasts as part of Budget 2021 which will take account of the impact of both COVID-19 and a no deal Brexit on the economy. 

We face these challenges from a position of strength, including running a budget surplus last year.  The Government's responsible economic management has allowed us to direct an unprecedented level of resources to addressing these challenges.  Further targeted measures to support businesses and affected sectors prepare and adapt will be considered in the context of Budget 2021 which will be based on the assumption of a disorderly Brexit.