Ireland would take four per cent economic hit in no-deal Brexit, says Irish finance minister

Ireland’s economy will take a four per cent hit in a no-deal Brexit, the country’s finance minister has warned.

Pascal Donohoe today told his government colleagues a “disorderly” Brexit would particularly impact on agri-food and manufacturing sectors in Ireland – leading to slower economic growth over the next five years.

The Irish government were told the risk of a no deal Brexit has increased in recent weeks, as Theresa May struggles to find a way through the deadlock on the issue in the UK parliament.

A no-deal Brexit could see a hard border return on the frontier between Ireland and Northern Ireland, although London, Dublin and Brussels have all ruled out installing customs infrastructure in this scenario. 

Speaking about the assessment, Donohoe said: “There remains considerable uncertainty surrounding the format the UK’s exit from the EU will take.

“The assessment by my Department shows that a disorderly exit would be particularly severe.

“The level of economic activity will be around 4.25 percentage points lower than our existing trajectory over the medium-term.

“This aggregate figure hides an even larger hit to economic activity in labour-intensive sectors such as agri-food and indigenous small and medium-sized enterprises.”

The UK exports £34bn of goods and services to Ireland, with £12.8bn coming the opposite way, according to House of Commons library research published in on Monday.

The trade links between Northern Ireland and the Republic are particularly pronounced, with a third of Northern Ireland’s goods exports going to its southern neighbour.

Some 27 per cent of all Northern Ireland’s goods imports come from the Republic.

Theresa May is planning to reopen negotiations with the EU over the post-Brexit backstop arrangement, designed to prevent hard border with Ireland.

The plan to align the UK with the EU's customs union until a trade deal can be implemented has been widely rejected by MPs.

The EU has repeatedly said the withdrawal agreement is not up for renegotiation.