Agri-food sector to be worst hit by hard Brexit
‘Regulatory divergence’ faces 90pc of economy
A Brexit boost for Ireland is due to be delivered in the coming days with successful talks expected to restore the power-sharing assembly in Northern Ireland.
Meanwhile, the Government’s Brexit study also found the wholesale and retail sector, which includes restaurants and tourist accommodation, will see major job losses due to a significant drop in consumer demand.
The Department of Business, Enterprise and Innovation study, which was undertaken by the respected Copenhagen Economics consultancy service, also warned fewer British tourists will visit Ireland once the UK leaves the EU. Companies selling electronics also face major challenges if Britain leaving the EU results in significant differences in regulations in the area of electronic goods.
The pharmaceutical and chemicals companies will have to brace themselves for economic fallout from Brexit due to the size of the sector.
The aviation industry was also highlighted as facing dangers as air traffic rights and regulations between the EU and the UK will no longer be aligned after Brexit.
The report said the “risk of regulatory divergence” was the main factor driving fears across all five sectors which make up 90pc of the economy.
“Even a relatively small Brexit impact at the firm level in these sectors has adverse consequences for the wider economy,” it stated.
Fianna Fail’s Brexit spokesperson Stephen Donnelly said the report should serve as a “wake-up call” and said the Government had “dithered” in its response to a hard Brexit.
“The chest beating of the past 18 months needs to be cooled down, and we need to start doing the groundwork needed to protect Irish jobs,” Mr Donnelly said.
The report, which was prepared for Minister for Business Heather Humphreys, warns that 20,000 jobs or 1pc of the entire workforce could be lost across all five sectors in the case of a hard Brexit.
The agri-food sector would see 12,400 job losses, while an additional 6,300 would become unemployed in the manufacturing and construction industry. The wholesale and retail sector, along with the aviation industry, would experience 1,300 job losses.
If Britain were to remain in the European Economic Area (EEA), the number of jobs lost would be around 10,000.
The study considered a range of outcomes across various post-Brexit scenarios, including an EEA arrangement, a customs union agreement, a free trade deal or the worst case scenario — a hard Brexit which would lead to World Trade Organisation (WTO) tariffs on all goods and services
The report said a WTO scenario would have the “most negative impact” on the economy. The economy is still projected to grow until 2030 but gross domestic product could be 7pc lower than expected in this case. An EEA arrangement would see the economy shrink by around 2.8pc.
“All of the scenarios considered produce a result that is less favourable for Ireland than a non-Brexit scenario. Nevertheless, regardless of the scenario, the Irish economy is still expected to record strong, positive growth out to 2030 — Brexit has a dampening impact, however, resulting in a lower growth rate than would otherwise have occurred,” it said. Humphreys told the Sunday Independent she was “acutely aware” that certain sectors were exposed to Brexit.
“What I can say at this point, is that the report clearly underlines the importance of a satisfactory transition period and exit deal,” she said.
“In that regard, the Government is utterly determined to get the best possible deal for the Irish people, negotiating as part of the EU 27, and in full support of chief negotiator, Michel Barnier.
“The Government has already taken significant steps to prepare our economy, including through my department’s Action Plan for Jobs and Building Stronger Business document, the Trade and Investment Strategy.
“We announced a number of bespoke measures in Budget 2018, such as the doubling of Brexit-related staff for State agencies as well as five new missions with a trade focus for the Department of Foreign Affairs and Trade.
BRITAIN’S negotiations on withdrawal from the European Union are taking place not in Brussels but inside the Tory party in London. These talks need to conclude fairly quickly or there will be a catastrophic no-deal exit a year from now.
It is the UK, not the EU, which sought a transition deal designed to avoid a cliff edge on March 29 next year, a date set in stone by the premature despatch of Mrs May’s Article 50 resignation latter. There is no prospect of agreeing any long-term deal on trade access by that time and the transition deal offered by the EU is essentially take-it-or-leave-it.
The UK must either accede to the EU’s preconditions or face a no-deal Brexit. There is no treaty-based entitlement for a resigning EU member to any transition period at all.
It is a concession, and the message from the EU has been consistent: agree acceptable terms on citizens’ rights, the financial settlement and the Irish border and a 21-month stop-the-clock arrangement is available.
Otherwise take your chanc- es and see the clock run down. It is impossible to engineer an outcome where the UK departs the EU, a decision already taken which self-implements on March 29 next year, while continuing to enjoy seamlessly the full trading prerogatives of membership.
The source of the impossibility is not the intransigence of the EU but the legal basis of its internal market and the British delusion that a full rupture with its institutional arrangements can be effected without practical consequences.
On Wednesday, Theresa May told the House of Commons once again that the UK would depart the single market and the customs union while somehow retaining ‘frictionless’ access.
She was responding to another patient explanation from the EU’s principal negotiator Michel Barnier that quitting the single market and customs union makes frictionless trade impossible.
On Friday, referring specifically to the land border in Ireland, Mr Barnier repeated the message: the British vision of sharp separation from Europe, as enunciated by the prime minister, implies trade barriers. With an abrupt separation this means not just tariffs, customs inspections and lorry queues (on all of the UK’s trade routes with the EU-27, not just in Ireland) but also barriers to exports of financial services, exclusion from the common aviation market, disruption to supermarket food supplies and myriad other crippling economic consequences.
The worst-case scenario for summer 2019 includes beach holidays in the Outer Hebrides and punnets of parsnips at Wimbledon.
Barnier also stressed that time is short: the parameters of the post-Brexit transition need to be clarified before the end of March. The withdrawal agreement and the transition terms need to be wrapped up by October or November in order to afford adequate time for parliamentary approvals.
Without a transition deal, the UK becomes a third country without a successor trade deal with Europe in little more than a year from now, the cliffedge exit which maximises economic damage all round. Even with a transition period lasting until the end of 2020, the time available to deliver a long-term deal could be insufficient.
The Tory civil warriors were always going to lose this unequal battle with the calendar. Reality eventual- ly intrudes. The UK has resigned from the EU through tendering two years’ notice that cannot be unilaterally withdrawn. For internal British political reasons, Mrs May chose to eschew, prior to the Article 50 resignation letter, any course of action designed to implement the referendum decision which minimised the economic damage.
Britain could have quit the EU while staying inside its trading arrangements had there been a political plan to do so. There has been no such plan ever since Mrs May’s capitulation to the Tory party’s Brexiteers at the party conference in October 2016. Her government’s policy, reiterated ad nauseam ever since, is to acquire a magic existence, simultaneously inside and outside the EU’s internal market like Schrodinger’s cat, which is simply not feasible and could not legally be conceded by the European Union even if it wanted to.
The declared policy is to pursue the hardest Brexit option available, courting the risk of a no-deal crashout, while insisting that any resulting difficulties are the fault of the EU and its negotiators. The cabinet minister responsible on the British side, David Davis, accused the European Union of ‘bad faith’ last Thursday, after a cabinet sub-committee in London failed to agree the UK’s negotiating objectives a full 10 months after the resignation letter was despatched.
Negotiating without objectives must look like bad faith when viewed from Brussels. On Friday morning, Barnier reported to a press conference on the week’s discussions at official level.
He revealed that the session devoted to the UK’s future relationship with the EU had not taken place due to what he tactfully described as a ‘diary clash’. The more plausible reason is that discussions were pointless in the absence of a British government position.
In the 20 months since the Brexiteers’ referendum victory in June 2016, the UK political system has simply failed to find a course of action in the broad national interest and with broad public support, even with the benefit of an unscheduled general election.
The Conservative leadership has pursued party unity by pretending that mutually inconsistent objectives can be delivered.
Any failure to achieve both a hard Brexit and frictionless access to European markets is the fault of Johnny Foreigner. There is a continuing refusal to choose from the broad menu on offer from the EU, a menu constrained only by the treaties of which the UK is a signatory. One could imagine from the tone of some of the UK media coverage that Britain has not resigned from the EU but has been unfairly expelled.
This mentality was again on display in the disagreement over one of the EU’s conditions for a transition period. In the offer made in December, the UK would continue fully (though a non-member of the EU) in both single market and customs union until the end of 2020, a de-facto 21-month extension of full trading access. But the regular flow of decisions by the EU institutions, including rule changes applicable to all participants, would no longer see the UK represented in the EU’s decision-making bodies.
Cue ‘vassal state’ headlines, horror and outrage in the Brexiteer press. If the UK is to continue in both single market and customs union through the transition they insist that, in fairness, the UK must retain a voice as rules get changed along the way.
But the EU’s decision-making procedures are laid down in treaties, and these treaties, surprise, surprise, do not provide for representation in Council, Commission or Parliament for non-member states. Indeed any decision-making improperly shared with non-members in contravention of the treaties would be open to legal challenge.
It needs to sink in that the UK has resigned from the EU, effective March 29 next year. Brexit means Brexit, to coin a phrase. For the cabinet Brexiteers and their backbench supporters the strategy is still the one articulated by the Stephen Fry character, General Melchett, in Blackadder: “If nothing else works, a total pig-headed unwillingness to look facts in the face will see us through.”
‘Talks without objectives look like bad faith when viewed from Brussels’