A report from Davy strategist Robbie Kelleher examines the implications for Ireland of a British withdrawal from the EU, known as “Brexit”.
Kelleher finds the probability of British departure to be low even if David Cameron’s Tories win the election. If the country does leave, the implications for Ireland would depend on Britain’s post-exit relationship with the EU. He sets out two possibilities: one in the which the impact on Ireland is minor, the other in which it is much bigger.
“It is likely that the UK would form a relationship with the EU similar to the relationship already in place between other countries outside the EU, including Switzerland, Norway, Iceland and Liechtenstein. They have formed a European Free Trade Association for the promotion of free trade and economic integration. Norway, Iceland and Liechtenstein have a joint European Economic Area agreement with the EU while Switzerland has signed a set of bilateral agreements with the EU,” the report says.
“If the UK set up a similar arrangement, the implications for the Irish economy would be small. As the UK is not a member of the euro zone, the currency situation would remain unchanged and there would still be free movements of goods and services.”
That’s a straightforward “no-news-here” vista but things could be different.
“If the new relationship between the UK and the EU changed dramatically and trade barriers and tariffs were erected, the consequences for the Irish economy could be significant. The dependence of the Irish economy on the UK has fallen in recent decades, but it remains an important trading partner,” says Kelleher.
“When Ireland and the UK joined the EEC in 1973, over 50 per cent of Irish exports went to the UK. That figure has dropped to just over 16 per cent today. [But] although over 40 per cent of Irish exports go to the remainder of the EU, the UK remains our single most important export market in Europe. Some 20 per cent of Irish exports now go to the US. The true importance of the UK economy as a trading partner is understated by these figures.”
