Published: Fri, 01 July 2016
“The UK outside the EU would be less attractive to Foreign Direct Investment because of uncertainty and reduced access to the EU Single Market. Less FDI in the UK would be likely to translate into a lower potential growth in the UK with negative consequences on Ireland’s economic growth,” Seán Kelly MEP, leader of the Fine Gael delegation in the European Parliament said in his speech to the Merriman Summer School in Ennis, Co Clare today (Friday).
Addressing the expected economic consequences of a Brexit, Mr Kelly warned that a UK exit from the EU would uncouple the world’s fifth largest economy from its biggest market: “About 2 million jobs in the 19-nation Eurozone depend on trade with Britain. Eurozone exports to the UK could suffer a shock following the sharp fall of sterling after the pro-Brexit result. Brexit would put trade and investment between the British and their EU neighbours into uncertainty.”
On the impact for Ireland, Mr Kelly pointed to an estimated drop in bilateral trade flows of about 20%; “While the 20 per cent estimate is an average figure, the impact would differ significantly across sectors and products. Some sectors such as Chemicals and Pharmaceuticals account for a large share of exports to the UK; however, sectors such as Agriculture, Food and Beverages and Basic Metals are relatively more dependent on exports to the UK and so the impacts on them would be more severe.
“Irish manufacturers fear paying duties on British made inputs; if Britain eases regulations on its own businesses, their Irish competitors who will still be following EU rules would be significantly disadvantaged.
“Trade between Ireland and Northern Ireland has been declining as a share and the overall volume is below the level expected for two trading partners located on an island. Overall Ireland is more important to Northern Irish exporters than Northern Ireland is for Irish exporters so, again, there would be differing impacts of a Brexit.”
Impact on energy
Ireland and the UK are interconnected, and quite literally in energy terms as Mr Kelly will explain: “An all-island electricity market has existed since 2007. Interconnection between Ireland and Northern Ireland is particularly important for Northern Ireland which relies on electricity imports from Ireland to make up for insufficient local electricity generation capacity.
“If the electricity market in Britain remains independent of the rest of the EU, enhanced interconnection with Britain would leave Ireland vulnerable to any problems in the British market. Under these circumstances, enhanced interconnection by Ireland with the rest of the EU, most likely to France, could provide useful diversification, reducing risk for Irish consumers. However, this would require a large infrastructural investment.
“If the UK left the EU, it would no longer be subject to EU rules on climate change policy and renewables. Outside the EU, there would be a lower chance that they would reopen discussions on trade in renewables. If the UK left the EU, it would no longer be subject to EU regulatory measures to deal with a possible crisis situation in the case of a gas or oil shortage. Ireland would then have to consider how best to provide protection from very unlikely, but potentially catastrophic outcomes.”
In a wider EU context, a Brexit will have a significant impact according to Mr Kelly: “With Britain out of the EU, Germany, France and other net contributors to the bloc’s budget would have to make even bigger payments than they do today and without Britain, more protectionist countries such as France would have less of a counterbalance, Mr Kelly has noted.