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Ireland starts counting cost of Brexit

July 2nd, 2016 8:10 AM

By Southern Star Team

Rose O'Donovan

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BRUSSELS was in a state of shock last Friday morning when it woke up to the news that the UK had voted to leave the European Union by 51.9% to 48.1% in a referendum the day before. 

In the run-up to June 23rd, polls had suggested the ‘remain’ camp would win, but narrowly lost out in the end as the populist ‘leave’ camp preyed on people’s fear about unbridled migration and taking back control from a bureaucratic Brussels. Scotland and Northern Ireland voted in favour, which casts doubt over the future unity of the country. 

What has ensued is years of uncertainty for the UK and its neighbours – especially Ireland. Once the markets opened on Friday morning, it became clear that panic was gripping the international stage as the pound plummeted to its lowest in over 30 years and share prices falling sharply. 

Early in the morning, UK Prime Minister David Cameron emerged from 10 Downing Street and announced he would be stepping down before the Conservative Party Conference in Birmingham at the beginning of October (2nd to 5). His successor remains unclear, but frontrunners include Home Secretary Theresa May, the former London Mayor Boris Johnson and Health Secretary Jeremy Hunt. 

When the dust settled, the enormity of the UK’s decision began to sink in, but there were more questions than answers. After a somewhat turbulent love affair with Europe since it joined on January 1st, 1973 – along with Ireland and Denmark – the UK must now formally launch proceedings towards a legal separation. 

Once the new Premier formally invokes Article 50 of the Lisbon Treaty before the European Council, the UK has two years to conduct exit negotiations and define the terms of the withdrawal process. 

AS the Common Agricultural Policy has been set in stone since 2013, there will be no immediate impact on single farm payments destined for Irish farmers, which are secure until at least 2020. 

It should be pointed out that farmers in the UK – many of whom receive hefty cheques in the post predominantly voted in favour of an exit - will continue to receive direct aid until the separation procedure is formalised (until at least 2019). After which time, there will be a review of the EU’s long-term spending and its farm policy, but this was already on the cards and is completely unrelated to the Brexit decision. 

Without one of the bloc’s key contributors to the spending pot, the EU budget is likely to take a hit – but the impact on farm spending will only become clear by the end of the decade. As the UK is Ireland’s largest trading partner – with more than €1.2 billion of goods and services traded between both sides every week supporting 400,000 jobs on both islands – if the value of sterling falls, it will make Irish food exports to the UK less competitive and make British food exported to Ireland more competitive. 

In terms of trade, Ireland’s agri-business will be the most vulnerable, with just over €5bn worth of farm produce – including €1.1bn of Irish beef and €1bn dairy products – exported to the UK last year. A recent Teagasc study suggests trade could drop by up to 8% or around €800 million per year. 

Dr Kevin Hanrahan, a leading agricultural economist, said farmers will feel the aftershock of Brexit as early as the summer as cattle, milk and grain prices are set to fall. The outcome of negotiations on its ‘new relationship’ with the EU, particularly in terms of accessing the common market will be key, he added. 

 

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