May’s Brexit plan could cost 20,000 jobs in Ire­land

Cen­tral Bank says com­pro­mise pro­posal would still dam­age Ir­ish econ­omy Bank cau­tions about pos­si­ble dis­rup­tion to fi­nan­cial mar­kets caused by UK exit

The Irish Times - Business - - FRONT PAGE - EOIN BURKE-KENNEDY

Bri­tish prime min­is­ter Theresa May’s com­pro­mise Brexit plan would still lead to a sig­nif­i­cant con­trac­tion in the Ir­ish econ­omy, cost­ing up to 20,000 jobs over five years, the Cen­tral Bank of Ire­land has warned.

In its lat­est quar­terly bul­letin, the Cen­tral Bank as­sessed the eco­nomic im­pli­ca­tions for Ire­land of the Bri­tish prime min­is­ter’s so-called Che­quers plan, which would see the UK re­main­ing in the sin­gle mar­ket for goods but not ser­vices.

It found that while the de­cline in eco­nomic ac­tiv­ity would be much less se­vere than a no-deal Brexit, the pro­pos­als would still see out­put here fall by 1.7 per cent and em­ploy­ment drop by 1 per cent over a five-year pe­riod.

The Cen­tral Bank has pre­vi­ously cal­cu­lated that a no-deal or dis­or­derly Brexit could see out­put here fall by 2.7 per cent, cost­ing up to 40,000 jobs over five years.

Mar­ket ac­cess

In its lat­est re­port, the bank also cau­tioned that its Brexit fore­casts did not take into ac­count the pos­si­ble dis­rup­tion in fi­nan­cial mar­kets caused by the UK’s exit, in­clud­ing ef­fects on bond and eq­uity mar­kets, which could ex­ac­er­bate the im­pact on the State.

While the Che­quers plan marks an im­prove­ment rel­a­tive to a no-deal Brexit and a re­ver­sion to World Trade Or­gan­i­sa­tion (WTO) rules, it said it still im­plies a sig­nif­i­cant cur­tail­ment in the UK’s mar­ket ac­cess to the EU.

Mark Cas­sidy, the Cen­tral Bank’s di­rec­tor of eco­nom­ics and sta­tis­tics, none­the­less said the Cen­tral Bank was still ex­pect­ing pos­i­tive out­put and em­ploy­ment growth dur­ing the post-Brexit pe­riod but the lat­est es­ti­mates re­flected how much lower they would be com­pared to a no-Brexit sce­nario.

In its bul­letin, the Cen­tral Bank up­graded its head­line growth fore­casts for the Ir­ish econ­omy, not­ing “the cur­rent phase of strong eco­nomic per­for­mance” was un­der­pinned by ro­bust and broad-based growth in em­ploy­ment, which in turn was driv­ing in­comes and con­sumer spend­ing.

It pro­jected the econ­omy would grow by 6.7 per cent this year and by 4.8 per cent next year.

At the same time, it ex­pects unem­ploy­ment to fall be­low 5 per cent in 2019.

Pro­jec­tions for the labour mar­ket con­tinue to sig­nal that the econ­omy is mov­ing to­wards full em­ploy­ment, al­though some ex­tra ca­pac­ity is pos­si­ble through fur­ther in­ward mi­gra­tion and in­creased par­tic­i­pa­tion in the labour mar­ket, it said.

Peak em­ploy­ment

This sug­gests an ad­di­tional 150,000-plus jobs could be cre­ated by 2020, gen­er­at­ing a new peak em­ploy­ment level of 2.35 mil­lion.

With the econ­omy ap­proach­ing full em­ploy­ment and the labour mar­ket tight­en­ing, wage in­fla­tion is set to ac­cel­er­ate to 3.3 per cent in 2019 and 3.4 per cent in 2020.

But Mr Cas­sidy said this was not in­con­sis­tent with the head­line growth rate and rapid bounce-back from the crash.

“We ex­pect more than 150,000 ad­di­tional jobs to be cre­ated in the econ­omy by 2020 and, with con­sumer price in­fla­tion likely to re­main sub­dued, sig­nif­i­cant gains in terms of real pur­chas­ing power can be ex­pected,” he said.

“How­ever, while this is all very wel­come, Ire­land must learn from past mis­takes and be proac­tive in guard­ing against boom/bust cy­cles, by build­ing up buf­fers to limit the costs of fu­ture down­turns,” he said.

Mr Cas­sidy said that, while Bud­get 2019 was bal­anced, the Cen­tral Bank would have pre­ferred the Gov­ern­ment to run a bud­get sur­plus to take some of the heat out of the econ­omy and build up fis­cal buf­fers for the fu­ture.

‘‘ The Cen­tral Bank as­sessed the eco­nomic im­pli­ca­tions for Ire­land of the Bri­tish prime min­is­ter’s so-called Che­quers plan

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