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Ireland most to fear in ‘Brexit’

Ireland will lose more than even the UK if it exits the EU, according to a detailed study by a German think-tank.

The Republic, with all other EU member states, will also end up paying more into the EU budget, as the UK pays €8.5bn more than it receives, which amounts to 0.5% of its GDP.

The report by Bertelsmann Stiftung is the first to consider the economic effect under different scenarios — from having Swiss-type trade deals to total independence.

It estimates that a ‘Brexit’ would cost the UK €300bn in higher costs of imports and exports, with the chemicals industry hardest hit at 11% and financial services at 5%.

However, the final cost for all countries would depend on the extent of trade isolation. If the UK reached a deal with the EU for a trade agreement similar to that with Norway and Switzerland, then the loss would be smaller, with barriers to trade but no extra tariffs.

The full effects would take about 12 years to be fully felt. By 2030, the study estimates, this soft exit would cost Ireland 0.82% of GDP compared to 0.63% for Britain itself.

Luxembourg would be the next biggest loser at 0.48%, with Germany way down the list at 0.08%. For the EU as a whole, without the UK, the cost would be 0.1% and 0.06% globally.

In a scenario with no trade agreement, tariffs would be similar to those that exist now between the EU and the USA, the report says.

In the worst-case scenario, the UK would be isolated from the EU and lose the privileges from the bloc’s 38 existing trade agreements with other countries.

In this scenario, the UK would be the biggest loser at close to 3% of GDP, with Ireland a close second at 2.66%.

However, such losses would just be the start, and would be compounded by follow-through effects in terms of investment and innovation that would see UK GDP shrink by 14%, the report estimates.

“Ireland would be hit particularly hard with real income losses of between 0.8% and 2.7%”, the report notes. The UK’s weaker economy would have an especially hard impact on Ireland as a major trading partner.

The report says the extreme scenario of political isolation is “politically unlikely”, but it shows how heavily Britain’s economic growth would depend on the EU’s goodwill.

“We are firmly convinced that the combination of economic and political dis- advantages of the UK exiting the EU would be detrimental for everyone involved and must be avoided,” the report concludes.

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