The simple fact that the Irish and the British economies are very closely integrated, with Ireland depending very strongly on exports to and imports from Britain means Ireland may lose almost as the UK from a Brexit.
In 2014 Ireland exported €14.61bn worth of goods to the United Kingdom. This figure represented 13.1% of exports from Ireland and 3.2% of imports to the United Kingdom.
In 2014 the United Kingdom exported €17.24bn worth of goods to Ireland. This amounted to 5.5% of exports from the United Kingdom and 35.6% of imports to Ireland.
According to the UK Trade & Investment Office, the main exports from the UK to Ireland (by value) are:
Fuel and lubricants
Manufactured articles
Machinery
Transport
Food and live animals
Chemicals
In fact, Ireland is the UK’s largest export market in food and drink, and second largest market in clothing, fashion and footwear.
The following graph (generated through our trade visualization tool GED VIZ) makes it clear how the Irish economy is dependent on trade with the United Kingdom.
Currently benefits for UK businesses exporting to Ireland include the common membership to the European Union. Thus, British goods are exempt from import duties and common standards and technical regulations, to some extent, apply.
But the upcoming UK in-out referendum on staying or leaving the European Union will have an especially substantial impact on the Irish economy.
Static Effects
In our static analysis, the country which would suffer most from a Brexit is the UK, followed by Ireland, Luxembourg, Malta, Cyprus and Belgium. [1]
Dynamic Effects
Ireland’s economic dependence on British exports and imports would mean a –20.1% change in real per capita income (in the worst case scenario) and a –2.1% (in the best case scenario). In fact, in the best case scenario, Ireland would suffer a higher decrease in real per capita income (-2.1%) than the UK (-2.0%). [2]
European countries that would have to absorb above average losses due to a Brexit are led by Ireland, followed by Luxembourg, Belgium, Sweden, Malta and Cyprus.
[1] Static effects of a possible Brexit refer to the welfare losses due to less cross-border trade between the UK and the remaining 27 EU countries. A reduction of international trade reduces the economic advantages of international division of labour. Hence there would be less economic growth.
[2] Dynamic effects are related to the fact that a decline in cross-border trade reduces the pressure from international competition. Consequently, companies have less need to improve their productivity through investments and innovation. Decreasing progress in productivity reduces the long-term rate of economic growth and hence diminishes the growth of real gross domestic product (GDP) per capita.
