Family incomes at risk as Brexit to spark price rises

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Family incomes at risk as Brexit to spark price rises

TDs warned of ‘severe’ impact as people set to lose out by an average of €880 in worst-case scenario


According to research by the ESRI think-tank, personal disposable income could be as much as 4.1pc lower after 10 years if there’s a disorderly no-deal Brexit. Stock photo: GETTY
According to research by the ESRI think-tank, personal disposable income could be as much as 4.1pc lower after 10 years if there’s a disorderly no-deal Brexit. Stock photo: GETTY

The impact of Brexit on Irish households will be “severe”, with families’ disposable income set to be hit in all scenarios amid increased prices for consumers.

The stark warning is contained in a briefing for TDs set to be delivered by the ESRI today.

It comes less than two days before the UK is due to crash out of the EU if a deal is not reached at today’s crunch European Council summit.

According to research by the ESRI think-tank, personal disposable income could be as much as 4.1pc lower after 10 years if there’s a disorderly no-deal Brexit.

An Irish Independent analysis of the projections suggests people with an average after-tax disposable income could lose around €880 in the worst-case scenario.

But even in a scenario where there is a deal, the same person could lose around €470.

The ESRI has been studying the impact of the UK leaving the EU on the economy here and has recently published a paper entitled: ‘Ireland and Brexit: Modelling the Impact of Deal and No-Deal Scenarios’.

One of its authors, Dr Adele Bergin, is expected to tell TDs today that “for households, the impact of Brexit will be severe”.

“Our results indicate that real personal disposable income, in the long-run, would be 2.2pc lower in a deal scenario; 3.9pc lower in a no-deal scenario; and 4.1pc lower in a disorderly no-deal scenario, compared to a situation where the UK stays in the EU.”

She will say that the impact on disposable income would be driven by “lower employment, lower wages and higher prices”.

This will see lower consumption in the long-run, which the ESRI paper defines as after 10 years.

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Ms Bergin’s statement adds: “Furthermore, households will face higher prices as a result of the imposition of tariffs or other increases in trading costs could be passed on as increased prices for Irish consumers.”

The ESRI’s projections for lower disposable income are based on the figure for aggregate national disposable income in 2017.

The organisation has also predicted that employment will be around 40,000 lower after 10 years if the UK leaves with a deal, and 80,000 lower in a disorderly no-deal scenario.

Ms Bergin is expected to warn the Budgetary Oversight Committee that the macroeconomic effects of Brexit are “significant and negative for the Irish economy”.

She is also to outline a “negative trade shock” that will reduce demand for Irish exports, with firms’ competitiveness affected by the depreciation of sterling.

Separately, the International Monetary Fund (IMF) cut its global economic growth forecasts for 2019.

And it warned growth could slow further, including because of a potentially messy Brexit.

The global rescue fund raised the growth forecast for Ireland by 0.1 percentage point to 4.1pc this year.

However, that figure does not allow for the risk of the UK crashing out of the European Union without a deal.

In a third global downgrade since October, the IMF said that some major economies, including China and Germany, might need to take short-term actions to prop up growth.

A sharp slowdown in Europe and some emerging market economies will give way to a general re-acceleration in the second half of 2019, the IMF reckons.

Global growth will likely be 3.3pc this year, the slowest since 2016.

More than two-thirds of the expected slowdown in 2019 owes to trouble in rich nations.

A no-deal Brexit would see the UK economy shrink 1.4pc this year.

Irish Independent

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