Britain votes to leave EU: What does it mean for Ireland?
Politically, socially and economically the decision of the UK to leave the European Union will have huge ramifications for Ireland, writes RTÉ Business Editor David Murphy.
But the most immediate impact will be felt by Irish businesses and their employees.
Sterling is falling rapidly against the euro and fell 8% in the hours after the result became clear. It is safe to assume sterling will remain very weak for a considerable period. That will make Irish exports to the UK more expensive and our imports from Britain cheaper.
This will hit some industries more than others. However, farming and agri-food exports are particularly exposed. The UK is absolutely vital for our agricultural produce because 52% of Irish beef goes to the UK, 60% of cheese exports and 84% of poultry.
Border towns will be hit by the fall in sterling because shopping will be much cheaper in the north of Ireland.
It is expected to have an immediate negative consequence for the British economy. That will have a spill-over effect on Ireland. Exactly how big that effect is going to be is hard to tell.
The latest analysis of the Government suggests it could knock between €1.1 billion to €2.7 billion off Ireland Gross Domestic Product. The ESRI has estimated it could reduce Ireland’s GDP by between 0.5% and 1.6%.
Already stockbrokers have begun to reduce their forecasts for the Irish economy for this year and next.
The Irish bond market has seen recent selling pressure although the cost of borrowing for Ireland remains relatively low. Brexit could add to Ireland’s cost of borrowing.
There will be uncertainty over the status of the border with Northern Ireland. Will there be customs and passport controls? We don’t know yet. But the reintroduction of the border could turn the clock back on the progress following the Peace Process.
There will be two years of negotiations between the EU and the UK regarding its future relationship with Brussels. While negotiations on an exit continue there won’t be tariffs – but after the UK leaves a levy on the import and export of goods to the UK could be introduced. In many ways this is a very significant danger for Ireland.
The biggest question of all is whether the UK will remain part of the Single Market which is the EU’s free trade area. Minister for Finance Michael Noonan has already said that he would prefer if the UK was to remain in the free trade bloc.
However, that decision will be made by the EU. Ireland cannot negotiate its own agreement with the UK. Making Brexit painless is not in the interest other European countries who will want to make it difficult for other countries to leave.
For the Irish Government keeping the UK in the Single Market will be the biggest battle of all and it will drag on for long time.
Estimates indicate that could damage Irish – UK trade by about 20%. With no clarity on whether there will be tariffs, signing a contract with a British customer will be difficult.
The imposition of border controls would act as an extra cost on businesses and could delay the transport of goods to and from the UK. That will cost Irish companies money.
The only benefit for Ireland is that some foreign investment earmarked for the UK may now come to Ireland. This could take the form of financial services companies relocating to Ireland. But it could also see more investment in Irish commercial property originally intended for the UK.
Even during the referendum campaign NAMA noticed some investment earmarked for the UK being spent on commercial property in Ireland.
These are the benefits of Brexit, however, most commentators believe the negatives far outweigh the positives.