Chequers-style Brexit deal would have 'significant negative impact' on Ireland, Central Bank warns

It says the impact would be around half as severe as a 'hard Brexit'

Chequers-style Brexit deal would have 'significant negative impact' on Ireland, Central Bank warns

Photo: Sam Boal/Rollingnews.ie

The Central Bank has warned that a Chequers-style Brexit deal would have a 'significant negative impact' on the Irish economy.

Theresa May has continued to defend her government's Brexit proposals, despite EU leaders having publicly rejected key elements of the plan.

European leaders are due to gather next week for a major summit to examine the progress in the Brexit negotiations.

According to the Central Bank's latest quarterly bulletin, a no deal or 'disorderly' Brexit would pose "immediate" challenges for Ireland's economy and financial system.

While it predicts that a Chequers-style deal would be only half as severe as a so-called 'hard Brexit', it would still have a significant negative impact compared to a 'soft Brexit' where the EU remains in the European Economic Area.

The regulator says that while Irish economic growth would still be positive, a Chequers-type deal would see the level of employment here 1% lower and the Irish GDP 1.7% lower.

Central Bank's Mark Cassidy. Photo: Leah Farrell/RollingNews.ie

Mark Cassidy, Director of Economics and Statistics at the Central Bank, observed: "Compared to our European neighbours, we remain particularly vulnerable to potential shifts in the international tax and trade environment.

"The threat of a disorderly Brexit, which would have an immediate disruptive effect on the Irish economy, remains ever present, while our research shows that the impact of a more favourable or 'soft' Brexit outcome would still hit Irish economic output, exports and employment."

The Central Bank has, however, offered 'upward revisions' to its overall growth and employment forecasts for this year.

It notes that there are signals that the Irish economy is moving towards full employment, meaning there'll be an additional 154,000 jobs by 2020.

The bulletin warns there is a risk of "overheating arising from the strength of domestic demand and tightening labour market conditions".

It also suggests that Ireland is more exposed than other EU countries to any changes in the international trade environment, due to our reliance on corporation tax and the large number of US firms here.