A 'no-deal' Brexit would hammer the Irish economy and wipe billions from its GDP
- If the UK does leave the EU without a trade deal, then Ireland could be one of the worst affected countries, says Oxford Economics.
- It shares a land border with the UK and trades heavily with its closest neighbor.
- Oxford Economics says that long term, 2% to 2.5% of GDP could be wiped from the Irish economy.
- View Markets Insider's homepage for more stories.
Ireland's economy would be among the worst-hit victims if the UK crashes out of the European Union without a deal, according to Oxford Economics.
The Irish economy, which is heavily tied to that of the UK, could lose 2% to 2.5% in the long term because of Brexit, due to the losses in trade.
UK Prime Minister Boris Johnson on Wednesday suspended parliament in the run-up to Britain's deadline to leave the EU. The move raises the risk of a Britain leaving the EU without a deal to 30%, Oxford Economics said in its report.
Ireland is the only country that shares a land border with the UK, and the two trade heavily through the border of Northern Ireland as well as through ports in England and Wales.
Oxford Economics predicts that if the UK left the EU without a deal, "by 2030, the Irish economy would be 2% to 2.5% smaller."
For Ireland, "the UK accounts for over half of Irish exports and over 40% of imports," in terms of weight, Martin Beck, lead UK economist at Oxford Economics, said in the note.
Cross-border goods trade with Northern Ireland in 2018 was around €3.5 billion ($3.87 billion), the economist said.
"This represented one-tenth of Ireland-UK goods trade, with Northern Ireland trade heavily concentrated in a small number of sectors, notably agri-food," said Beck.
"Given that the shortest sea crossings from Ireland are to the UK, the UK is also important for transit traffic to and from Ireland," he said. More than half of Irish exports by volume with all non-UK markets is estimated to be transported via the UK, he added.
"Were new customs requirements to result in congestion in UK ports, Irish trade with the world could suffer," Beck said in his note.
Much of the trade between Ireland and the UK involves food and drinks, which made up 31% of exports to the UK in 2018, according to Beck.
In a no-deal Brexit, he said, "Irish GDP would be around 1.5% lower by the end of 2021 compared to our baseline forecast."
Beck also noted that the importance of the UK to Ireland has declined.
"In 1973, when Ireland and the UK joined the European Economic Community, the UK accounted for 54.8% of Irish goods exports and 50.1% of imports. In 2018, those shares were 11.4% and 21.7%, respectively."
He added also that foreign firms may look to relocate into Ireland if there were barriers to trade after Brexit and foreign direct investment would increase by 7%.