Wednesday, November 7, 2018

A German economist has suggested that the only way for Northern Ireland to avoid negative economic impacts of Brexit is to unite with the Republic of Ireland

Kurt Hubner's conclusion is in a report examining the impact of different Brexit scenarios on Ireland. It suggests unification would mean that by 2025 Northern Ireland's economic output would be almost £16 billion higher than it otherwise would have been. Economists do not agree about the potential benefits of unification. The major issue concerns the subvention that Northern Ireland receives from Westminster - the shortfall between what Northern Ireland spends on services and raises in taxes. Hubner's economic model effectively suggests that unification would lead to major productivity and output gains which would more than cover the subvention. His report is a revision of a previous paper published in 2015 called "Modeling Irish Unification" which suggested that unification would boost economic output per head by up to 17,000 euros (£14,845) by 2025. The latest version is updated with new official data and Brexit impacts. It continues to suggest a positive, albeit smaller, impact of about 10,000 euros per head by 2025 in event of reunification. By contrast, Hubner suggests that a hard Brexit, on World Trade Organization terms, would mean output per head would be by about 10,000 euros (£8,732) less by 2025 compared to what it would be in a no-Brexit scenario. Even with a scenario in which Northern Ireland remained in the single market both parts of Ireland would suffer losses in comparison to a no-Brexit scenario. He states: "Compared to a hard-Brexit, unification is by far the better option. As a matter of fact, it is the only option with positive net effects." Hubner's model suggests that the the adoption of the Irish tax system, greater openness to foreign direct investment and reduced trade barriers would see Northern Ireland enjoy a period of "economic catch up."


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