Northern Ireland is on course for an economic recession, warns a UK industry association, amid growing fears of a “no-deal” Brexit, compounded by the instability of a collapsed power-sharing arrangement in government.
The Confederation of British Industry (CBI) said the latest figures from the Northern Ireland Composite Economic Index (NICEI), an experimental new metric similar to the GDP, showed “worrying levels of economic contraction.”
“The region looks to be on the brink of recessionary territory,” said Angela McGowan, CBI’s Northern Ireland director, speaking to the British publication the Guardian.
‘Sound and Fury’ Versus Pragmatism
“Clearly the current political vacuum and Brexit uncertainty are taking their toll on economic performance,” McGowan said, according to the Belfast Telegraph.In her speech, Fairbairn urged politicians in the EU and UK to cut through the “sound and fury” surrounding the terms of Britain’s exit from the European Union, and put pragmatism and the economy first.
Hard Brexit, Soft Border
What appeared to matter a great deal to Theresa May, who spoke to politicians and business leaders during a visit to Northern Ireland’s Belfast on Friday, is a form of Brexit that leaves the border between the two Irelands as soft as possible.“The economic and constitutional dislocation of a formal ’third country' customs border within our own country is something I will never accept and I believe no British prime minister could ever accept,” May said.
She decried the prolonged Northern Irish government crisis, in which London has to run things in the territory from afar until a local, or “devolved” government, is formed.
“It is a matter of frustration and regret that after enjoying the longest period of unbroken devolved government since the 1960s, Northern Ireland has now been without a fully functioning executive for over eighteen months,” she said in Belfast.
The 4 Brexits and Their Price Tags
Some British lawmakers said the country should leave the EU and trade on World Trade Organization terms—another term for the “no-deal” scenario—if the EU makes too few concessions.According to Boris Johnson, now former foreign secretary who resigned last week, the Chequers plan, which includes an agreement to follow “a common rule book” with the EU on regulations and standards governing the goods trade, is “in important ways … Brexit in name only.”
In a published statement, Johnson likened Chequers to “volunteering for economic vassalage.”
The UK’s chief Brexit negotiator David Davis also quit over the Chequers plan.
“In my view the inevitable consequence of the proposed policies will be to make the supposed control by Parliament illusory rather than real,” wrote Davis.
“As I said at Cabinet, the ‘common rule book’ policy hands control of large swathes of our economy to the EU and is certainly not returning control of our laws in any real sense.”
Fairbairn, however, whose voice echoes that of captains of industry, calls for a pragmatic approach that puts economic interests above national sentiment.
“This is a blueprint that, behind the headlines, behind the politics, gets pretty close to the answers firms were looking for,” she said of the Chequers plan.
“It’s not perfect. There are gaps to fill, not least more to be done on services, which make up 80 percent of the UK economy. But the proposal for a free trade area in goods with a common rule book is exactly what businesses have asked for. It will protect supply chains across Europe,” Fairbairn said.
The IMF estimates that if the UK leaves without a preferential customs agreement—the “no-deal” option—European Union countries will suffer long-term damage of up to 1.5 percent of annual economic output.
Ireland would be the worst hit, followed by the Netherlands, Belgium, and Luxembourg. Germany would also suffer due to industrial supply chains.
“The long-run impact of Brexit is likely to be unevenly distributed across countries, with Ireland exhibiting the highest exposure,” stated the report.
The economic damage from Brexit would be minimal if Britain were to adopt the “soft Brexit” Norwegian-style model of being part of the European Economic Area. May has rejected this variant, as it would largely require Britain to stick to EU rules.
A Norway deal (EEA rules) is the cheapest, at 17 billion pounds ($22.3 billion), with the “no deal” (WTO option) registering over four times that, at 81 billion pounds ($106 billion).
There are two versions in between, the Canada deal (Free Trade Agreement or FTA) at 57 billion pounds ($75 billion), and May’s own preferred tailor-made variant. According to Portes’ calculations, May’s comes in at 40 billion pounds ($52 billion).
The IMF did not estimate the costs of Brexit for Britain in its publication, which accompanies a two-yearly assessment of the EU, though earlier this week it downgraded its forecast for British growth this year to the weakest since 2012.
Before Britain voted to leave the EU, the IMF warned of a possible recession under an “adverse” scenario, drawing criticism from Brexit supporters.
Earlier this year Bank of England Gov. Mark Carney said Britain’s economy was around 1.5-2.0 percent smaller than it would have been if the public had voted to stay in the EU—not far from what the IMF forecast for a “limited” Brexit scenario.
Possible consequences, the paper states, include disruption to the aviation industry and goods from the UK being subject to customs checks.
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