Irish businesses should plan for the worst in a post-Brexit scenario, PricewaterhouseCoopers warned after UK prime minister Theresa May triggered article 50 as expected.
The downbeat view from one of Ireland’s leading business advisory groups came as business lobby Ibec said an “assertive national effort” was required to avoid the “very real risk of a divisive, damaging Brexit divorce”, especially one that would see the UK exit the EU with no trade deal in place nor any transitional arrangements to soften the blow for economies and companies.
PwC says that differences over the free movement of people and the size of any financial exit settlement mean the UK is likely to arrive at a hard Brexit and "third country" status as a trading partner, with tariffs applying both to exports and imports.
Two years is simply not enough time for the UK to negotiate both its exit from the European Union and the terms of any new trading relations, PwC says. However, it does believe that the Common Travel Area between the Republic and the UK will be retained.
"We believe that it is likely that the UK will leave the EU by the end of March 2019 acquiring third-country status with no trade or transition arrangements in place," said Feargal O'Rourke, managing partner of PwC Ireland.
"At this stage, it is likely that World Trade Organisation rules will kick in to govern the future EU-UK trading relationship."
Damaging split
Ibec wants the Government to use its influence and prioritise efforts to ensure this doesn’t happen, with chief executive Danny McCoy warning the “combative and hardline UK position has significantly increased the chances of a divisive and damaging split”.
The Irish Tourist Industry Confederation (ITIC), citing data from the Central Statistics Office published on Wednesday, says the impact of Brexit is already damaging Irish tourism.
“The three-month trend from Britain [in visitor numbers to Ireland] shows a decline of 6 per cent but, looking at February alone, there is a very worrying decline of 22 per cent,” said ITIC chairman Paul Gallagher.
If that trend continued over the whole year, he said, it would cost up to 120,000 jobs in the economy. Britain accounts for two out of every five international visitors to Ireland.
As negotiations on Brexit get under way, business and academic leaders north of the Border said the process of cutting ties with the EU would deliver the “biggest political and economic challenge” the North would face this century, adding the Northern Ireland was “uniquely vulnerable” to potential changes, particularly new tariffs and rules as a result.
Ibec published a guide for its members on Wednesday, advising them how to manage Brexit while PwC unveiled an online Brexit Impact Assessment tool for clients that allows them to assess their exposure to Brexit in six key areas.
“Irish companies trading with the UK now need to start planning for a World Trade Organisation regime post-March 2019,” said PwC Brexit partner David McGee. “Reasonable assumptions can be made, estimates can be calculated and the risks can be assessed. Mitigating actions can be taken.”
