Esmond Birnie: It is a mistake to assume that a no deal Brexit would be a disaster for the Northern Ireland economy

HM Treasury modelling exercises of 2016-18 predicted that no deal would affect �5bn of output in Northern Ireland by 2033 or 9-10% of GDP ' an economic disaster for the Province of unprecedented proportions ' but can be shown to contain a series of flaws in its assumptions
HM Treasury modelling exercises of 2016-18 predicted that no deal would affect �5bn of output in Northern Ireland by 2033 or 9-10% of GDP ' an economic disaster for the Province of unprecedented proportions ' but can be shown to contain a series of flaws in its assumptions
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The political context shaping Brexit keeps shifting.

As recently as April the United Kingdom political context seemed to make a very soft Brexit, with continued membership of both the single market and customs union, quite likely.

Dr Esmond Birnie is senior economist at the University of Ulster

Dr Esmond Birnie is senior economist at the University of Ulster

Things have changed.

The draft Withdrawal Agreement appears to have gone, Theresa May is leaving office and the next prime minister will probably commit to a departure on 31 October regardless.

Since the confirmation that the next prime minister will be Boris Johnson or some other relatively hard Brexiter is likely to provoke a chorus of woe from Northern Ireland it may be worth making some considered points regarding a no deal:

Assertions that no deal would represent a economic disaster for Northern Ireland of unprecedented proportion — e.g. £5bn of output by 2033 or 9-10% of GDP — are frequently made but rest on a slender evidence base: the HM Treasury modelling exercises of 2016-18.

The latter can be shown to contain a series of flaws in their assumptions.

A no deal could be accompanied by what economists would call a “positive shock” to costs and prices in the United Kingdom (a “good thing”): this is implied by the previously announced plans to reduce tariffs on a wide range of imports coming into the UK (and, in particular, the plan to allow tariff free entry for Republic of Ireland goods crossing the border into Northern Ireland).

Research published last week for the Department of the Economy (from the two European Union trade lawyers Lux and Pickett) suggest a wide range of methods that government in Northern Ireland could use to facilitate trade post-no deal.

Even in the particularly difficult area of food products and animals they note the precedent that have been agreed between Switzerland and the European Union, that food and animals do not have to be taken to border inspection points.

It is probably a mistake to view things in binary terms, ie. deal ‘relatively good’ versus no deal ‘truly awful’.

There could be degrees of management within the no deal through mini deal (provided there is enough political good will).

Sometimes the criticism is used that no deal would require the imposition of direct rule.

Strictly speaking, what we would need is a functioning regional level administration — ideally that would be through a successful restoration of devolution but if that is not happening then at some point we will have to face up to the logic of this situation.

Even without Brexit, this half-way house, worst of all possible worlds position is not sustainable in socio-economic terms.

The recent economic indicators have actually been mixed — Northern Ireland employment growth continues to be moderate to strong.

Output was still growing in a number of sectors in Quarter 1 2019 (close inspection of the performance of individual sectors suggests that it would be a mistake to explain away recent growth as simply a product of stockpiling ahead of the previous Brexit deadline).

In 2018 Northern Ireland received many more Foreign Direct Investment (FDI) projects than it did in 2017.

• Dr Esmond Birnie is senior economist with the Economic Policy Centre at the University of Ulster