This update to the Brexit Contingency Action Plan takes place in the context of the extension of the Brexit Article 50 process until 31 October 2019 (postponed to 31 January 2020 with an effective exit date on 31 December 2020), which was agreed by the European Council at its meeting on 10 April. The Conclusions of that European Council make clear that there can be no opening of the Withdrawal Agreement, nor can the extension be used to start negotiations on the future relationship. The EU is willing to look again at the Political Declaration on the future relationship should the UK move on its red lines. Following this decision of the European Council, the default withdrawal date of the United Kingdom from the European Union is 31 October 2019 (postponed to 31 January 2020 with an effective exit date on 31 December 2020) at 23:00 (Irish time). It is the Government’s assessment that there is a significant risk of a no deal Brexit on 31 October (or thereafter) and, accordingly, work on no deal Brexit preparations continue to be taken forward as a matter of priority across government departments and agencies.
A no deal Brexit will mean that on 31 October 2019 (postponed to 31 January 2020 with an effective exit date on 31 December 2020), the UK’s status under EU law will change from that of an EU Member State to that of a ‘third country’ with no trade or cooperation agreements in place with the EU. The transition period, provided for in the Withdrawal Agreement, will not apply. The UK will be immediately outside the Single Market and the Customs Union and will no longer be part of the framework of EU law.
Addressing the challenges of a no deal Brexit takes place at a number of levels and has involved responses at the EU level, responses by Government and responses by businesses and affected sectors. The Government published its Brexit Contingency Action Plan on 19 December 2018 and since then intensive work has taken place across Government on all aspects of the Action Plan. The EU has put in place a range of contingency measures across key sectors of EU competence.
While preparations at all levels will help, a no deal Brexit will be highly disruptive and will have profound political, economic and legal implications, first and foremost for the UK, including most significantly Northern Ireland, as well as having significant impacts on Ireland and the rest of the EU. In a no deal scenario, it will be impossible for the UK to maintain the current seamless arrangements with the EU across the full range of sectors, from justice and security cooperation, to transport connectivity, to trade flows and supply chains. The significant short-term risks in the event of a no deal Brexit are set out clearly in this Action Plan and discussed below.
A no deal Brexit will be an unprecedented event, bringing with it disruption and severe negative economic impacts. Prudent economic planning is a key part of our ongoing preparations, as is the provision of supports, including economic supports, to help businesses and other affected sectors to prepare.
s set out in the Summer Economic Statement, there is a high degree of uncertainty in forecasting the macroeconomic impact of a no deal Brexit. However, it is clear that the impacts would be very damaging and in the first year following a no deal Brexit it is predicted that the growth rate would be almost 3 per cent lower than currently projected.
In parallel to the predicted macroeconomic impacts, a no deal Brexit will have severe negative effects in a number of sectors and among smaller and medium-sized businesses, and it will be widely felt on a regional basis. The impacts will be felt most notably in many exporting sectors, including agri-food, indigenous manufacturing and tourism, as well as in importing sectors, especially those characterised by just-in-time supply chains, such as parts of the retail sector. The impact of UK import and export exposure for firms could be compounded by currency volatility. Further, given Ireland’s macroeconomic and sectoral exposures to the UK, these impacts will be asymmetric relative to the rest of the EU. The European Commission is committed to supporting Ireland in addressing the specific challenges of Irish businesses.
There are likely to be significant job losses in the most exposed sectors in a no deal scenario, with an estimated increase in unemployment of 50-55,000 after the UK leaves the EU.
While every effort is being made to prepare and put in place mitigation measures, there is little doubt that, at least in the initial period, tariffs and checks and controls on UK imports will be disruptive to trade across the Irish Sea. Furthermore, in the immediate aftermath of a no deal scenario, it is anticipated that the UK ‘landbridge’ may be subject to severe delays and there would also be significant disruption to the all-island economy.
Given the ongoing uncertainty about Brexit, the Government’s Summer Economic Statement outlines two possible budget scenarios. Both are based on the assumption that Brexit will happen, but the scenarios differ depending on whether the UK departure is an orderly one based on the Withdrawal Agreement or if it is a no deal Brexit. The Government will decide– based on Brexit developments – which is the more likely scenario and anchor the October budget in this.
The Minister for Finance has flagged that a no deal scenario could involve a headline deficit in the region of 0.5-1.5 per cent GDP for next year, depending on the magnitude of the economic shock. This would introduce a deterioration in the General Government Balance (GGB) of up to €6.5 billion. Key elements of the proposed budgetary response will also involve temporary, targeted funding for the sectors most affected and the automatic counter-cyclical support that the public finances provide to the economy through, for instance, increased welfare payments due to higher unemployment numbers.
The Government prepared extensively for a no deal Brexit in advance of the 29 March and 12 April deadlines. Key measures included:
Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Act 2019 – the ‘Brexit Omnibus Act’, signed into law by the President on 17 March, focuses on protecting Irish citizens, assisting businesses and jobs, and securing ongoing access to essential services and products. The various Parts of this legislation are ready to be commenced as needed in the event of a no deal Brexit.
Infrastructure, staffing and ICT systems at our ports and airports – sufficient infrastructure was put in place to manage the necessary checks and controls on East-West trade with the UK outside the EU.
Work at Dublin Port involved nine projects across eight sites to deliver 13 new inspection bays, documentary and identity check facilities, office facilities and parking for up to 128 heavy goods vehicles (HGVs).
400 additional Revenue staff recruited and trained for customs facilitation and checks; nearly 190 Department of Agriculture, Food and the Marine (DAFM) staff trained and in place to conduct import controls; 59 additional Health Service Executive (HSE) staff trained and in place.
Common Travel Area (CTA) – a high level MOU that reaffirms the commitment of both Irish and British Governments to the CTA was signed on 8 May 2019. Under the CTA, which will be maintained in any scenario, Irish and British citizens can travel freely, move to live, work and study, and access services including healthcare and social benefits.
EU contingency measures – there was agreement at EU level on a range of temporary contingency measures in key areas, including maintaining basic air connectivity and road haulage access between the EU and the UK in the event of a no deal Brexit.
Extradition arrangements – workable alternative extradition arrangements under the 1957 Council of Europe Convention on Extradition were put in place for the event of a no deal Brexit, which would see the UK immediately fall outside the European Arrest Warrant process.
Business supports – a wide range of support programmes for enterprise and the agri-food sector have been developed and put in place, including the €300 million Brexit Loan Scheme and €300 million Future Growth Loan Scheme, Enterprise Ireland’s Brexit Scorecard, Bord Bia’s Brexit Barometer and InterTradeIreland’s Brexit Vouchers.
Communications and stakeholder engagement – this has included over 100 Brexit information seminars and events since September 2018; a nationwide media information campaign and 750,000 leaflets distributed nationwide through 5,000 public outlets; 18 meetings of the Brexit Stakeholders Forum chaired by the Tánaiste; and five meetings of the All-Island Civic Dialogue.
Financial and budgetary preparations – undertaken over three budgets to build the resilience of the economy, including the establishment of the Rainy Day Fund and investment in long-term economic development through Project Ireland 2040.
The period between now and the 31 October deadline for a possible no deal Brexit will be used to strengthen and refresh these preparations. Key areas for continued work include:
Providing further additional infrastructure at ports and airports to enhance our capacity to manage the necessary checks and controls on goods coming from the UK as smoothly as possible.
Commitments to the people of Northern Ireland, including access to Erasmus+ and the European Health Insurance Card (EHIC).
Preparing for Budget 2020 and making provision for targeted funding for the sectors most affected in the event of a no deal Brexit.
A new phase of the Government’s Brexit communications campaign, which will include a call to action to businesses operating in exposed sectors to take the necessary steps to prepare for a no deal Brexit.
Ongoing engagement with Member States and with the European Commission on key outstanding issues, including on potential supports for Ireland and affected sectors.
A no deal Brexit poses risks for the Good Friday Agreement and raises profound political challenges and lasting societal impacts for Northern Ireland. The prospect of operating outside the EU with no deal would be extremely serious for businesses, large and small, and for the overall economy of Northern Ireland. It would also have potentially severe implications for North/South cooperation.
The consequences of a no deal Brexit for the political process in Northern Ireland could be very damaging. A no deal Brexit risks significantly undermining wider community relations and political stability in Northern Ireland with potential related security concerns
If the Institutions are not in place at the time of a no deal Brexit, there is a risk that the UK Government might initiate a move to Direct Rule in Northern Ireland as a response to managing the shift to new post-Brexit arrangements in the timeframe involved.
The UK’s departure from the EU without an agreement gives rise to substantial challenges to the maintenance and development of North/South cooperation, which relies to a significant extent on a common EU legal and policy framework.
The commitment of the Government throughout the Brexit process to preventing the emergence of a hard border on the island of Ireland remains of the highest priority. Without the Withdrawal Agreement and the backstop, there are no easy answers. There is a process of engagement between Ireland and the European Commission on how to meet, in a no deal scenario, our shared twin objectives of protecting the integrity of the Single Market and Ireland’s place in it, and avoiding a hard border on the island of Ireland.
There should be no illusion – a no deal Brexit would result in far-reaching change on the island of Ireland. This would particularly impact on North-South trade, which could no longer be as frictionless as it is today. The impact of tariffs, and of the customs and SPS requirements and associated checks necessary to preserve Ireland’s full participation in the Single Market and Customs Union, would be significant for the operation of the allisland economy and would involve additional costs for and disruption to businesses throughout the island, particularly those in Northern Ireland. We continue to work closely with the Commission with a view to minimising these negative consequences of no deal, but any arrangement will clearly be sub-optimal.
The commitment of the Irish and British Governments to the maintenance of the Common Travel Area provides important assurances for the way people from both North and South live, move and access public services on the island of Ireland (as well as across both Ireland and Great Britain).
The Government’s overall objectives have been consistent from the start: seeking to minimise the impact on trade and the economy, protecting the peace process including avoiding a hard border, protecting the all island economy, maintaining the Common Travel Area, and reinforcing the commitment to and participation in the EU. These objectives continue to guide our approach in any Brexit scenario.
A no deal Brexit will have profound implications for Ireland on all levels. These implications involve severe macroeconomic, trade and sectoral challenges both in the immediate term and in the longer term. Addressing those challenges requires difficult and significant choices of a practical, strategic and political nature.
It is only by Government, business and citizens working together nationally and with our partners in the EU that we can aim to mitigate as far as possible the severe impacts of a no deal Brexit and ensure that we are as prepared as we can be for the changes it will bring. Over the period to end-October, the Government will continue to work to strengthen the resilience of the economy and to prepare our country for Brexit. We will build on the extensive contingency work completed in the first quarter of the year, focusing on the further steps identified in this Action Plan. This includes a particular emphasis on encouraging and supporting increased preparedness amongst exposed parts of the business sector. We will do so as a strong and committed member of the EU and with the solidarity and support of our EU partners.