If the UK leaves the EU should Ireland follow?

One influential hedge fund thinks that it would be a good idea...

If the UK leaves the EU should Ireland follow?

Sean Dempsey / PA

An influential London-based hedge fund thinks that Ireland will be forced to follow the UK if the British public chooses to leave the EU.

Toscafund, which was founded by Martin Hughes and manages assets worth £3bn, argues that disruption caused by Britain leaving would force Ireland to also go.

Its paper, titled Britain stands up – Better to exit European Union, says that the value of trade between the regions, which is worth €1bn per week, could be affected by new trade restrictions if the UK goes. If Ireland has forced to comply with these rules it says that the country would be better off outside of the EU.

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Toscafund’s chief economist, Savvas Savouri commented on the relationship between the UK and Ireland: "Ireland quite frankly has a connection with the UK like no other eurozone nation, indeed none other across the EU. And it is this connection which would be broken, were the UK to be isolated."

Speaking to The Irish Times he added that in his opinion Ireland, and Scotish separatists, "need to realise that economically their interests are best served joining England in engaging with a flourishing Asia. Their alternative is floundering with the rest of Europe."

According to research by Open Europe, in a worst-case scenario, where the UK is not in a position to negotiate favourable trade terms with the EU, the impact of a Brexit on Ireland could be a permanent loss of 3.1 percent of GDP by 2030.

Even the best case scenario for the Irish economy would lead to a permanent loss of 1.1 percent of Ireland's total GDP by 2030.

Setting a precedent

On Monday, EU Council president Donald Tusk said the talks on reforming the bloc are at a "critical" stage and there is a "real risk" that the EU could break up.fter negotiations in Romania, Mr Tusk said: "It will be a crucial summit with the two biggest challenges to the future of the European Union on the agenda: The United Kingdom's future membership of the European Union and the migration crisis.

After negotiations in Romania, Mr Tusk said: "It will be a crucial summit with the two biggest challenges to the future of the European Union on the agenda: The United Kingdom's future membership of the European Union and the migration crisis.

"On neither can we afford to fail.

"At stake is the United Kingdom's membership of the EU. A question which only the British people can and will decide.

"At stake is also the future of our European Union where we will all have to decide together, and where we cannot and will not compromise on the fundamental freedoms and values."

He added: "This is a critical moment.

"It is high time we started listening to each other's arguments more than to our own.

"The risk of break-up is real because this process is indeed very fragile. Handle with care. What is broken cannot be mended."

Business behind a vote to 'stay'

Most of Europe’s larger business representative organisations, including the Confederation of British Industry and IBEC in Ireland, have published an open letter backing the reform package, brokered by President of the EU Council, Donald Tusk, and up for discussion over the next two days.

Cameron needs unanimous support for these proposals from all other member states and the two major sticking points are Eastern European objections to limits on migrant benefits in the UK and French objections to more regulatory independence for the City of London

To the wire

Eoin Drea, economist with the Maartens Research Institute in Brussels spoke to Breakfast Business, he says that a deal will be done if there are no "nasty surprises."

Mr Drea said that obstacles are more likely to come from Eastern countries, rather than France and other leading eurozone nations.

While it may come "down to the wire" and there is not a 100% guarantee that a deal will be passed, he believes that it will get over the line.

The European Council will meet tomorrow, and again on Friday. If reforms for the UK are passed, a in/out vote on EU membership is likely to take place on June 23rd.