herald

Sunday 25 August 2019

No-deal Brexit would push up prices and cost us 50,000 jobs

Leo Varadkar
Photo: PA
Leo Varadkar Photo: PA

More than 50,000 jobs will be lost amid rising food and clothes prices if the UK continues on the path toward a disorderly Brexit.

Doomsday predictions on the impact of a no-deal scenario compiled by the Department of Finance suggest the economic impact will be "particularly severe".

The agriculture sector and small businesses that export to the UK will begin to shed employees during the second half of the year, with the crisis "deepening" in 2020.

"In 10 or 12 weeks' time we could find ourselves needing to find a lot of money to save people's jobs because there are people working in the food industry, in agriculture, small medium enterprises, SMEs, and in small exporters whose jobs may be under threat," said Taoiseach Leo Varadkar.

Capital projects such as the MetroLink could also be danger, while promises of income tax cuts would be reviewed ahead of the next Budget.

A majority of British politicians last night voted for Theresa May to demand a new deal on the Irish backstop - despite continued insistence from the EU that the withdrawal agreement cannot be renegotiated.

Until recent days, Mrs May had maintained that the deal she agreed with the EU last November was the best one possible.

However, she has now backed calls for the backstop to be replaced with undefined "alternative arrangements".

Adding further confusion to the UK position, MPs also passed a motion to "reject leaving the EU without a deal".

Mrs May said will now go to Brussels to demand "legally binding changes to the withdrawal agreement".

Risks

Britain's Prime Minister Theresa May leaves 10 Downing Street, as she faced a vote on her Brexit 'plan B'. Photo: REUTERS/Toby Melville
Britain's Prime Minister Theresa May leaves 10 Downing Street, as she faced a vote on her Brexit 'plan B'. Photo: REUTERS/Toby Melville

"There is limited appetite for such a change in the EU and negotiating it will not be easy," she said.

However, a spokesperson for EU Council president Donald Tusk said the deal "is not open for renegotiation".

The stand-off moves all sides ever closer to a no-deal scenario.

Finance Minister Paschal Donohoe said it was very difficult to accurately predict the full scale of the risks that brings, as there is no precedent for economists to study.

He said food shortages would not be an issue because of the high level of produce which originates in Ireland.

However, the economy would be 4.25pc smaller in 2023 than currently projected.

Mr Donohoe said this figure "hides an even larger hit to economic activity in labour-intensive sectors such as agri-food and indigenous small and medium-sized enterprises".

Current forecasts are for an unemployment rate of 5pc by 2023, but a no-deal Brexit would push that up by two percentage points.

A projection that 2.49 million people would be in jobs here by 2023 falls to 2.44 million under the departmental analysis.

"Employment growth would still take place in our economy, but we will have 55,000 fewer citizens working than we would've had, had an orderly Brexit and transitionary period taken place," Mr Donohoe said.

The minister added large employers do still see positive prospects for jobs and investments in Ireland.

However, among smaller companies that have to manage their own supply chains into the UK, concern is growing.

Imports

"It is important to emphasise that we do have an economy still capable of delivering growth," he said.

However, every household would see its disposable income reduced as the price of food and clothing rises.

Department of Finance chief economist John McCarthy said many high street chain stores were likely to be affected as around one quarter of imports come from the UK.

He said any benefits from a drop in sterling would be more than wiped out by World Trade Organisation tariffs.

The Government has ruled out an emergency in the coming months but admits that spending and taxation plans for 2020 and beyond may have to be scaled back.

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