No-deal Brexit may see 73,000 jobs lost by 2021
There could be 73,000 fewer jobs in Ireland by 2021 if Britain crashes out of the EU without a deal at the end of the month.
Regions reliant on agricultural employment, including the south-west, the midlands, the mid-west, and the mid-east, will be worst affected in the case of a no-deal Brexit, according to the Central Bank, which also forecasts a slow down in wage growth and a dent in consumer spending in this scenario.
The Central Bank has published its fourth quarterly bulletin of 2019, focusing on Brexit and the variables in the Irish economy dependent on a deal or no-deal scenario. The bulletin comes with the caveat that estimates are uncertain “due to the fact that Brexit is an event without historical precedent”.
The bulletin includes two forecasts for the Irish economy: One in the case of a deal and one in the case of a no- deal. It is the first time that the Central Bank has ever published two forecasts for the economy.
Assuming a no-deal Brexit, with Britain crashing out of the EU at the end of the month, the Central Bank forecasts a contraction in many aspects of the Irish economy. GDP growth could slow to 0.8%, with investment, exports, and imports all expected to decline in 2020 and resume in 2021.
In comparison to the deal scenario, the Central Bank of Ireland forecasts 73,000 fewer jobs in Ireland by 2021, with areas like agriculture and tourism particularly badly affected.
“Regions that are heavily reliant on agricultural employment — such as the south west, midlands, mid-west, mid-east and border regions — are more acutely exposed to potential income or job losses under a no-deal Brexit,” the bulletin states.
It also reports that in the case of a deal, employees can expect wage increases of 3.6% in 2019 and 4.2% in 2020.
However, in the event of a no deal, income growth would be slower at 3% in 2021, which would further impact consumer spending.
The bulletin notes that a disorderly Brexit would mean that ports and logistics operations in Ireland, the UK and on the continent would need to adapt to a substantial number of new regulations in a short space of time.
“In the long run, evidence suggests that these increases in delays and administrative burdens would reduce UK-Ireland trade by 9.6%.
In the short run, however, the process of adapting to new regulations and implementing a new tariff regime will result in delays at ports/airports compared with the status quo.”
Additionally, it said that the process of stockpiling goods ahead of the deadline has been an issue for many companies as the October deadline comes at a time of year when warehouses are typically at peak capacity, meaning that stockpiling is difficult and more costly.
The Central Bank also warned that Brexit is not the only external risk to the Irish economic outlook. The outlook for global economic activity has continued to worsen in recent months.
Director of economic and statistics Mark Cassidy said that the economy continues to grow despite the uncertainty.
Our current projection is that in the event of a no-deal Brexit, the economy would expand by 0.8% in 2020, as opposed to 4.3% if a deal can be agreed.
“Our forecast is for around 73,000 fewer jobs being created by the end of 2021 compared to a situation where a deal on Brexit can be reached,” Mr Cassidy said.
“If a disorderly, no-deal Brexit can be avoided, it is projected that underlying economic activity will grow at a relatively solid pace in the coming years, though with some moderation in growth in prospect.
In a no-deal scenario, however, significant disruption and the negative shock to economic activity would adversely affect output and employment and the path ahead for the next few years would be very different.”
