Voters in the UK have decided that they want to leave the EU.
This seems to have come as a bit of a surprise to almost everyone.
How could this affect Ireland Financially ?
As part of Budget 2017 – the government published their Summer Economic Statement just before the UK vote on the EU .
In the statement there was a small section on the possible effects on Ireland of the UK leaving the EU . It said that recent reports from the UK Treasury and The National Institute Economic Review suggested that a vote to leave the EU could reduce UK GDP by between 2.3 and 6.0 per cent.
It also stated that it is estimated that every 1 per cent reduction in UK GDP would reduce Irish GDP by approximately 0.2 per cent over two years. This implies a possible fall in Irish GDP in the range of 0.5 to 1.2 per cent .
A fall in UK GDP would also be expected to impact on our other EU trading partners. Estimates suggest that if euro area GDP were to also fall by 1 per cent, Irish GDP would fall by a further 0.4 per cent.
Both UK reports also predicted a fall in the value of sterling in the event of a vote to leave the EU. A 5 per cent sterling depreciation could cause a loss in Irish GDP of 1 per cent after 2 years.
If the UK had remained in the EU – Irish GDP was projected to increase by 5% in 2016. The effect of a British exit from the EU could lower this to 3 or 4% .
Irish exporters will be the first to suffer if , as expected , the pound weakens significantly against the euro. This will make their euro-priced goods more expensive for UK importers . Foreign Minister Charlie Flanagan said this week that if this happens , Ireland will have to consider taking steps to assist firms exporting into Britain.
There is , on the other hand , possible good news for Ireland as a result of the UK vote. Companies who have their EU bases in the UK may end up moving to other EU countries , possibly to Ireland. Morgan Stanley have already said that they might move UK staff to Dublin or Amsterdam because of Brexit. Before the vote , Switzerland’s Credit Suisse announced they would be moving a range of operations including a trading floor from London to Dublin.
Other banks that might move from the UK to Ireland are non-EU institutions with large London offices, including US banks such as JPMorgan and Goldman Sachs.
Deutsche Bank employees 12,000 employees in London, and it said it was looking to relocate a good portion to elsewhere in Europe.
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