Brexit would leave Ireland in unchartered territory, Ibec warns

Business, Economy | Tue 29 Mar | Author – Business & Finance
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In its Quarterly Economic Outlook, Ibec has predicted economic growth of 4.6% this year and 3.9% in 2017, but cautioned that the threat of the UK leaving the EU.

The body believes that a UK exit would send Ireland, Britain and Europe into uncharted and treacherous waters. The value of sterling has already fallen significantly and a vote to leave would prompt a further significant depreciation, heaping pressure on businesses trading with the UK.

This is in addition to the countless other risks that would arise during and after the period of a negotiated exit. A slowdown in Chinese growth also adds to the uncertain international outlook.

Exchange rate is seen as the most immediate risk. In the aftermath of a possible Brexit the sterling/euro exchange rate is likely to move toward or above parity, leaving Irish firms selling into the UK market 30% less competitive by June than they were in January through exchange rate movements alone.

Any new UK-EU arrangements may undermine free trade. An agreement would take at least two years, but is likely to take much longer. This would bring a level of uncertainty for Irish firms exporting to Britain in the short term impacting on employment, investment and export plans.

Ibec CEO Danny McCoy said: “The UK’s continued membership of the EU is of overwhelming strategic importance to Ireland and Irish business. The polls however suggest a tight vote. As the referendum approaches, it is increasingly important that we have a stable domestic political backdrop to ensure Ireland is in a strong position to effectively manage every eventuality.”

He continued: “There is no room for economic complacency, we need to focus on staying flexible and competitive. Many new pay claims go far beyond what is realistic and affordable. There can be no return to bubble-economy wage inflation or spiralling relativity pay claims.”

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