Grim Cen­tral Bank warn­ing on Brexit

Deputy gover­nor Si­b­ley out­lines ‘enor­mous chal­lenges’ fac­ing Repub­lic Price­wa­ter­house­Coop­ers re­it­er­ates view that hard Brexit the most likely out­come


The ef­fects of Brexit on the Repub­lic will be “deeply pro­found” and in the event of no trade agree­ment be­ing reached with Bri­tain, the State’s GDP could be 3 per cent lower, cost­ing 40,000 jobs, the Cen­tral Bank has warned. Ed Si­b­ley, deputy gover­nor in charge of pru­den­tial reg­u­la­tion, de­liv­ered stark warn­ings in re­la­tion to Bri­tain’s EU exit yes­ter­day at an event or­gan­ised by Arthur Cox at the DCU Brexit In­sti­tute.

“Brexit could be one of the most sig­nif­i­cant events to af­fect the Ir­ish econ­omy and Ir­ish fi­nan­cial ser­vices firms in a gen­er­a­tion,” he said. “The full sig­nif­i­cance is al­most im­pos­si­ble to pre­dict at this stage.

“Firstly, the de­ci­sion by the UK to leave the Euro­pean Union is one that will have knock-on ef­fects for years, even decades, to come. For Ire­land, th­ese ef­fects are largely go­ing to be neg­a­tive and deeply pro­found.”

Mar­ket ac­cess

Mr Si­b­ley’s warn­ing came as ac­coun­tancy firm, Price­wa­ter­house­Coop­ers re­it­er­ated its view that a hard Brexit is the most likely out­come in the UK’s de­par­ture from the EU.

Mr Si­b­ley said there were “enor­mous chal­lenges” ahead, and ex­pressed concern that this view “does not ap­pear to be shared by ev­ery­one”. Any free trade agree­ment, he said, could still rep­re­sent a “sub­stan­tial loss” of mar­ket ac­cess, with ex­porters fac­ing “con­sid­er­able chal­lenges”. This would be fur­ther ag­gra­vated by any neg­a­tive eco­nomic shock to the UK econ­omy by re­duc­ing consumer con­fi­dence. “Tak­ing th­ese fac­tors into ac­count, our es­ti­mates sug­gest that in the event of no post-Brexit trade agree­ment be­ing reached, GDP in Ire­land might be around 3 per cent lower af­ter 10 years than un­der a no-Brexit sce­nario,” said Mr Si­b­ley. This fig­ure could be ex­pected to trans­late into roughly 40,000 fewer jobs, he added.

Worst out­come

Sep­a­rately, PwC has said in a new re­port that while a hard Brexit is the worst out­come, it re­mains the most likely.

Fear­gal O’Rourke, the com­pany’s man­ag­ing part­ner said that while a hard Brexit is the worst out­come, it is one com­pa­nies need to pre­pare for on the ba­sis of the slow na­ture of progress. “All in all, on the bal­ance of prob­a­bil­i­ties, we still think it’ll be a hard Brexit . . . I’m not sure we’re go­ing to see any­thing for the next two months that would al­low us to switch po­si­tion,” he said, not­ing that PwC will re-eval­u­ate af­ter the up­com­ing June sum­mit of EU lead­ers.

Part of the prob­lem, Mr O’Rourke sug­gested, is the fact that the mes­sage from the UK is mixed. “There are a lot of mov­ing parts and the fact is that the Bri­tish po­si­tion is still not en­tirely clear,” he said, fore­cast­ing the UK head­ing in the di­rec­tion of a Cana­dian type free trade agree­ment.

A hard Brexit would mean the UK would leave the EU at the end of March 2019 with­out a fu­ture trade agree­ment.

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