Written answers

Wednesday, 18 November 2020

Department of Trade, Enterprise and Employment

Brexit Issues

Cormac Devlin (Dún Laoghaire, Fianna Fail)
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36. To ask the Minister for Trade, Enterprise and Employment his views on whether Brexit will have a positive impact on any policy area or sector under the remit of his Department; and if the details of same will be provided. [37175/20]

Photo of Leo VaradkarLeo Varadkar (Dublin West, Fine Gael)
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Since the outcome of the UK referendum in 2016 confirming the UK’s intention to leave the European Union, the Government has, while fully respecting that decision, acknowledged that it is regrettable. 

Whatever the outcome of the ongoing future partnership negotiations between the EU and the UK, we are preparing for the fact that the UK will leave the Single Market and the Customs Union at the end of this year. This will have significant and lasting implications particularly for Irish businesses trading with the UK, excluding Northern Ireland.

Of particular interest to the Deputy is a 2018 study entitled "Strategic Implications for Ireland arising from changing EU-UK trading relations" a comprehensive and independent expert study that my Department commissioned from Copenhagen Economics. The study examined the implications of Brexit for the Irish economy and trade, quantifying the impact of possible new barriers to trade which might emerge as a result of Brexit.

The study also provided analysis of the likely impact of Brexit on key sectors of the Irish economy. Five sectors were identified that account for 90% of the impact and these are: Agri-food, Pharma-chemicals, Electrical Machinery, Wholesale & Retail, and Air Transport. The rise of non-tariff barriers due to regulatory divergence is the main factor driving the results as opposed to the imposition of the tariff regimes of the EU and the UK on their respective imports/goods.

This analysis was undertaken on the basis of no policy action being taken although this of course is not the case given the extensive Brexit mitigation actions put in place across Government and across all sectors of the economy in the past few years. 

All of the scenarios examined in the 2018 study produce a result that is less favourable than a non-Brexit scenario. The scenarios considered reflected four of the possible outcomes from the future relationship between the EU and the UK – an EEA scenario, a Free Trade Agreement (FTA), a Customs Union, or a worst-case, no trade deal, WTO scenario.

The WTO scenario was found to have the most negative impact on the Irish economy gradually reducing GDP growth by 7% by 2030; an EEA scenario would be least damaging gradually reducing GDP growth by 2.8% by 2030. The study found that regardless of the scenario modelled, the Irish economy was still expected to record strong, positive growth out to 2030. Brexit would have a dampening impact, however, resulting in a lower growth rate than would otherwise have occurred.

Following the adoption of the Withdrawal Agreement and the Revised Political Declaration (RPD) on the Future Relationship between the EU and the UK last year, my Department undertook further Brexit analysis with Copenhagen Economics. Under this latest study, two additional scenarios for a Free Trade Agreement were examined to take account of the provisions of the RPD published in January 2020. This latest study is also available on my Department’s website at www.dbei.gov.ie. 

Overall, the findings from this study suggest that a Brexit outcome based on the RPD is likely to reduce Irish GDP by between 3.2% and 3.9% by 2030 compared with a baseline where the UK remains a member of the EU. This compares to a negative impact of 7% in the no deal (WTO basis) modelled in the previous Copenhagen Economics study.

In response to the various Brexit analysis and studies undertaken across Government I have, over the course of the last three budgets put in place through the enterprise agencies, an extensive suite of enterprise supports to assist businesses to meet the challenges presented by Brexit. They range from liquidity support through short-term and long-term loans, to restructuring aid for businesses in severe operating difficulties. The majority of enterprise supports are open to all businesses, including SMEs, and not just those that are clients of the enterprise agencies.   

Budget 2021 allocated unprecedented resources to confronting the twin challenges of COVID-19 and Brexit, with €340 million to be spent on Brexit-related measures. Government has also provided for a recovery fund to assist businesses in the aftermath of COVID-19 and Brexit. A full list is available on my Department’s website www.dbei.gov.ie and on www.Gov.ie/Brexit.

Notwithstanding the overall negative impact on the economy, IDA Ireland has been working hard to capture any possible increase in investment in Ireland as a result of Brexit. This work has resulted in 93 Brexit-related investments to date with an associated employment potential of 5,900. Two-thirds of these investments are in the International Financial Services sector with the remaining third spread out over the Life Sciences, Technology, Business Services, and Engineering sectors. While this is good news, it by no means makes up for the negatives and the expected difficulties that businesses, particularly those that trade with Britain, will face as a result of Brexit.

The Government remains committed to protecting and strengthening the Ireland-UK trading relationship following Brexit and it is the case that the UK has always, and will continue, to be an important market for Ireland.

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