Wednesday, 18 November 2020
Department of Finance
Ireland regrets the UK’s decision to leave the EU, although we respect it. From 1 January 2021, many aspects of our relationship with our nearest neighbour will change fundamentally as we will no longer share EU membership. While the Government remains committed to protecting and strengthening the Ireland-UK relationship following the end of the transition period, I can advise the Deputy that the net impact of Brexit on the policy areas within my remit is anticipated to be strongly negative.
Regarding the economic impact, joint Department of Finance and ESRI analysis of the macroeconomic implications of Brexit, published in March 2019, broadly captures the range of possible future relationships between the EU and the UK.The analysis finds that in the long-run (i.e. 10 years), compared to a no Brexit baseline, the level of GDP in Ireland would be around 2.6 per cent lower in a deal scenario and 5.0 per cent lower in a no-deal scenario. The principal negative impact arises from the trade shock, mitigated somewhat by a positive FDI shock resulting from a redirection to Ireland of investment from firms looking to relocate within the single market. While there is uncertainty around the ultimate trade and FDI impacts, the analysis suggests that in each scenario, any positive impact on FDI would be far outweighed by the negative impact on trade.
Regarding Ireland’s international financial services sector, the nature, scale and complexity of the sector will change in a number of ways as a result of firms relocating from the UK as a result of Brexit and those looking to set up operations in the EU for the first time. The industry in Ireland has become broader and more diverse with more firms carrying out a greater range of regulated activities than at any time. The Government and the state agencies, such as the IDA, continue to work to fully capture any opportunities for inward investment that emerge.
However, it should be noted that the Central Bank of Ireland has had to work closely with financial services firms and market participants to ensure that they have contingency plans in place for the end of the transition period on 31 December in order to mitigate a range of risks that would otherwise arise. My Department has also included measures in the 2020 Brexit Omnibus Bill in order to minimise disruption to financial services.
Finally, there is also a firmly negative impact on customs procedures and the impact of these requirements on business processes and costs due to the UK leaving the Single Market and Customs Union from 1 January. Any business, regardless of size, that moves goods from, to or through the UK will need to complete a range of customs formalities, as well as Sanitary and Phytosanitary and other regulatory requirements. This will result in additional costs and administrative procedures associated with customs formalities for all businesses that trade with the UK. It is expected that the majority of businesses will engage a customs clearance agent to act on their behalf. This will increase pressure on this sector in terms of increased client numbers and increased customs declarations as each consignment will require an individual customs declaration.
The Government has been planning for Brexit since before the UK referendum to ensure that Irish citizens and businesses are as ready as possible for all possible scenarios. On 9 September, the Government published its Brexit Readiness Action Plan, which details the actions Government will take and the actions that citizens and businesses should take to prepare for the end of the transition period. Citizens and businesses should now finalise their readiness work for the end of the transition period. This work will continue in the weeks ahead.