"Crashing out of EU could hurt NI economy, admits Donaldson after mass job losses warning"

Press/Media: Expert Comment

Description

My evaluation of a Department for the Economy report on potential impact of No Deal Brexit (that report published 11 July 2019) cited in this Belfast Telegraph article

Subject

The citation was taken from this press release

Release: Immediate Thursday 11 JULY 2019

 

What to make of NICS/Department for Economy paper on the effect of Brexit?

Dr Esmond Birnie, Senior Economist

“The NICS/Department for the Economy paper published today is a useful compilation of statistics and arguments re. possible economic effects of a No Deal Brexit. To that extent, it is a welcome addition to the debate we should be having about how to best handle the possibility of a No Deal, but here are some reservations about the document:

  • It is up-front about No Deal inevitably meaning, “… immediate and severe consequences”. We’ve read that sort of language before- from HM Treasury in the Spring of 2016 when they predicted that a Brexit Vote would lead to an immediate and severe recession- that forecast was wrong.

  • The document seems to take a very binary approach to “Deal versus No Deal”. In reality there could be some mitigation of regulatory problems through “mini deals within the No Deal”, though this does depend on some goodwill from the EU27 including the Republic of Ireland government.

  • Like other commentators, this particular document relies on the HM Treasury projections that a No Deal would knock about 9% of Northern Ireland’s GDP by 2033 compared to the status quo. But some of the assumptions used by Treasury should be questioned (e.g. how they used gravity modelling, the assumed elasticities or responsiveness of exports to increased costs, the alleged link between Single Market membership and productivity levels).

  • Headline statements “40,000 jobs are at risk”, do need to be qualified- they  should not be interpreted as meaning 40,000 people will become unemployed [Note to Editors 1].

  • This particular NICS/DfE paper does not spell out their own assumptions as to how increases in, say, tariff or non-tariff barriers will feed through to lower levels of Northern Ireland exports.

  • The trade analysis is rather “static” not really allowing for the ability of businesses to move activity to new markets: restricted to Northern Ireland to Republic of Ireland, Northern Ireland to Great Britain and Northern Ireland to the EU26 trade. We need some analysis of Northern Ireland could export more to the rest of the world outside of the EU. If we can’t do that we need to work out why that is so and Northern Ireland Departments, amongst others, should be doing something about it.“

     

Ends

Note to Editors

  1. There is a similarly here to oft made claims that automation will put, say, one-third of jobs “at risk”. In reality this does that mean that 33% of people are likely to lose their jobs- some of the 33% may lose their jobs but others will find the nature of their work changed or will even end up doing new jobs.

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Dr Esmond Birnie, Senior Economist, 07703 184459,

Period12 Jul 2019

Media contributions

1

Media contributions

  • Title"Crashing out of EU couudl hurt NI economy, admits Donaldson after mass job losses warning"
    Degree of recognitionRegional
    Media name/outletBelfast Telegraph
    Media typePrint
    Duration/Length/SizeUlster University senior economist Dr Esmond Birnie said the Stormont no-deal Brexit report was "useful" but he had some reservations about it. "It is up-front about a no-deal inevitably meaning immediate and severe consequences", Mr Birnie added. "We've read that sort of language before- from the Treasury in the Spring of 2016 when it predicted that a Brexit vote woudl lead to an immediate and severe recession. That forecast was wrong". He pointed out the document took a very binary appraoch to "deal versus no deal". "In reality, there could be some mitigation of regulatory problems through mini deals etc....
    CountryUnited Kingdom
    Date12/07/19
    DescriptionCited in Belfast Telegraph article
    Producer/AuthorBelfast Telegraph
    PersonsEsmond Birnie