(Bloomberg) -- Ireland is battening down the financial hatches because of concern the U.K. will crash out of the European Union without a deal and damage one of Western Europe’s fastest-growing economies.
Finance Minister Paschal Donohoe will sketch out his plan to limit the damage of a no-deal Brexit when he delivers his 2020 budget at about 1 p.m. in Dublin on Tuesday. The spending plan will assume the economy will grow by 0.7% compared with 3.3% should Britain leave with an accord to secure ongoing trade. A no-deal could cost 85,000 Irish jobs, he has said.
The urgency to come up with contingency measures has become more acute since the U.K.’s new proposals failed to break a deadlock over what will happen to the Irish border. Britain accounts for about 15% of Ireland’s trade.
Employers’ group IBEC wants the government to set aside 1.5 billion euros ($1.7 billion) to shelter the economy from what it describes as a “catastrophe.” “The risk of a ‘no deal’ is imminent and action is required immediately,” said Gerard Brady, chief economist at IBEC. “If firms collapse in a no-deal scenario they will not be easily replaced.”
The threat to Irish prosperity comes after the economy has only now fully recovered from the European debt crisis. Donohoe is preparing the budget on the basis of no-deal Brexit, not because he believes that outcome is inevitable, but because he says it’s the sensible course of action. He will seek to shore up support for farming, fisheries and manufacturers.
While the domestic industries which are most vulnerable to a no-deal Brexit account for 11% of total exports, they are responsible for more than half of all direct employment of Irish exporters, IBEC says.
Brexit advocates in the U.K. have long hoped that economic self-interest will eventually force Ireland to blink on the issue that’s holding up the U.K. exiting the EU: how to avoid border infrastructure returning to the island of Ireland.
Prime Minister Leo Varadkar has set Friday as an informal deadline for his U.K. counterpart, Boris Johnson, to come up with an improved offer on Brexit.
“Timing is of the essence,” said Brady. “In the event of a no-deal Brexit, we expect significant impacts from continued depreciation in the value of sterling, canceled investment, falling consumer confidence, rising costs and considerable trade disruption.”