Fail
to Plan-Plan to Fail
Planning for Brexit
In a referendum on the 23rd of June 2016 the UK electorate voted to leave the EU. As a result the changing relationship between the UK and Ireland will be determined between EU and UK parliamentarians. The impacts on individuals and businesses in Ireland and the UK will range between minor where the agreement reached is similar to that between Norway and the EU, to major where the trade between the EU and the UK comes under the World Trade Organisation (WTO) tariff regime and labourr movement between the EU and the UK is curtailed.
The Exchange Rate
In September 1992 Britain adopted a floating exchange rate system
after withdrawing the pound sterling from the European Exchange Rate
Mechanism (ERM). The Brexit factor has already kicked in with a
weakening of the pound against the euro and the dollar in this floating
exchange rate system.
The impacts may vary dependant on the types of goods and services.
The effects will be:
1. The Higher prices of imported goods should spell a drop in demand.
2. Exports should see a rise in demand because of the falling value of
Sterling.
Source: Graph compiled from Central Bank of Ireland Data
Source: Graph compiled from Central Bank of Ireland Data
Business Sector Analysis
The methodology BPPM shall be using to measure potential impacts on
sectoral businesses is an econometric model. This model focuses on the
behavior of the Irish and UK economies in terms of gross domestic
product, product consumption, employment, product imports and product
exports using variables such as tarriffs, exchange rates, and interest
rates.The price elasticity of demand for products is the degree to which
demand for a good or service varies with its price. Price elasticity
of demand varies both within and between sectors dependent on
factors such as:
1. - Availability of Substitutes
2. - Definition of Product
3. - Number of Product Uses
The USA and the UK are by far, Ireland’s largest trading partners. The impact of currency changes is reflected by the fact that exports to the UK decreased from 12.29% (€13.8.4bn) 2015 to 11.39% (€13.31bn) in 2016.
The impacts of price changes brought about because of exchange rates and tariffs can be examined for good and services within the following sectors.
| Food and Live Animals |
| Crude Materials, Inedible, Except Fuels |
| Animal and Vegetable Oils, Fats and Waxes |
| Manufactured Goods Classified Chiefly by Material |
| Miscellaneous Manufactured Articles |
| Beverages and Tobacco |
| Mineral Fuels, Lubricants and Related Materials |
| Chemicals and Related Products, n.e.s. |
| Machinery and Transport Equipmentt |
| Commodities and Transactions n.e.s. |
Irish Exports Classified by Commodity 2014-2016
Changes in Irish Exports to Great Britain and Globally
Source: Chart compiled from Central Statistics Office Data
Effects of Brexit on the UK and Ireland Economies
The formula for an economy’s annual gross domestic product GDP is the sum total of C + G + (X – M), where C, and G represent consumer spending and government spending. (X – M) which represents exports minus imports, or net exports. If exports exceed imports, the net exports figure would be positive, indicating that the nation has a trade surplus. If exports are less than imports, the net exports figure would be negative, and the nation has a trade deficit.
Source: Figures from Central Statistics Office (CSO)
2012 - 2020 BPPM CRO Reg. No. 463423