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The Direct Long-term Trade Impacts of EU Exit Scenarios on Northern Ireland

The Fraser of Allander Institute (FAI) was commissioned by the Department for the Economy (DfE) of the NI Civil Service to model the possible long-term economic impacts of a range of Brexit scenarios for Northern Ireland (NI).

Since the 2016 EU Referendum, there has been an explosion of studies looking at the impact of Brexit (see for instance Ciuriak et al., 2017, Ebell and Warren, 2016, Hantzsche et al. 2018, HM Treasury 2016, HMG 2018, Roy et al., 2016). In the main, these studies have tended to focus upon the possible impacts of Brexit for the UK economy as a whole. The regional studies that do exist have typically apportioned national results to sub-regions of the UK based upon employment and sector shares. The main exception to this has been the work of the Scottish Government and the FAI (see for instance The Scottish Government, 2019 and Roy et al., 2016).

This study focusses on the impact of Brexit and potential future trade relationship with the EU on NI in isolation. It assesses the impacts on NI of dislocations to its trade with the EU and/or GB in the event of different Brexit scenarios.

This has two key implications. Firstly, potential spillover from the rest of the UK (and from the rest of the World) to NI are not taken into account. If Brexit leads to a slowdown in the rest of the UK, this will have its own knock-on effects on the NI economy. To provide a flavour of such effects we test the sensitivity of our results to a potential 5% and 10% reduction in sales to GB (see section 5.1.2).

Secondly, since the primary focus of this study is the impact of Brexit on trade, we do not look at other sources of economic impact such as changes in migration regulations, exchange rates, impacts on labour productivity, foreign direct investment, business confidence or uncertainty.

Authors

The Fraser of Allander Institute (FAI) is a leading economy research institute based in the Department of Economics at the University of Strathclyde, Glasgow.