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Recession likely if no-deal Brexit occurs

Wednesday, 29th August, 2018 4:54pm

Recent weeks have seen the prospect of a no-deal Brexit become more likely. This unpalatable occurrence could threaten Ireland’s prosperity and cause Ireland to go back into recession in 2019, according to a UCC economist.

Dr Declan Jordan is also the organiser of the biggest conference ever held in Cork city, the Congress of the European Regional Science Association (ERSA), which runs this week until Friday.

“We are just seven months from Brexit, and there is little evidence that the UK government has the political will or ability to agree on a deal with the EU.

“This leaves the Irish economy in a precarious position,” said Dr Jordan, Director of the Spatial and Regional Economics Research Centre, UCC.

“The focus in Ireland on Brexit has been on the backstop agreement to prevent a hard border. There is far more at stake, however,” he added.

“The latest research shows that, among EU partners, only Irish regions are as exposed as UK regions to a no-deal Brexit. If the UK government continues with the nonsensical approach that the EU needs the UK as much as the UK needs the EU and seriously considers walking away with no deal, the Irish economy will be the major innocent casualty.”

Starting on Tuesday, UCC has been hosting the Congress of the European Regional Science Association (ERSA), which is predicted to attract more than 800 delegates and generate €1.4 million for the city.

Previously hosted in cities like Vienna, Lisbon and St Petersburg, the 58th edition of the annual congress in Cork will feature cutting-edge research on regional and urban development from across the globe and generate more than 3,000 bednights for the city.

Delegates — 95 per cent of whom will be international visitors — include participants from the OECD, the European Commission and the European Investment Bank.

Brexit

Speakers on Brexit include Professors Raquel Ortega-Argiles (University of Birmingham), Philip McCann (University of Sheffield), Bart Los (University of Groningen) and Professor Frank van Oort (Erasmus University Rotterdam) who are leading a large UK-funded project analysing the regional and sectoral implications of Brexit, the most substantial work currently underway on Brexit.

Having estimated the exposure of European regions to Brexit, their analysis found that “only regions in Ireland face exposure levels similar to some UK regions” and the Republic of Ireland's national level of Brexit trade related risk exposure is over 10 per cent of GDP.

The analysis of this project shows that the regional impacts in the UK and the rest of the EU are substantial. Their research for the UK finds that “Brexit will aggravate, not reduce, interregional imbalances. Local government officials in London and the south-east are less pessimistic about Brexit than those in other regions, and our research suggests that this is justified.

“Second, the fact that many of the Leave-voting regions are also likely to face the most severe post-Brexit challenges also means that in the long run there is expected to be a profound mismatch between public expectations and economic outcomes”.

Professor Edgar Morgenroth of DCU will present a paper on the potential regional impact of Brexit in Ireland.

Inequality and populism

Professor Andres Rodriguez-Pose of the London School of Economics has focused recently on the role of spatial inequality in explaining the rise of populism, from Trump to Brexit to the right-wing European movements, which he called “the revenge of the places that don’t matter”.

“The revenge of the places that don’t matter – reflected in the rapid rise of populism – represents a serious and real challenge to the current economic and political systems.”

According to Rodriguez-Pose, “regional economic divergence has become a threat to economic progress, social cohesion, and political stability in Europe” and this has been the little-considered factor driving recent political upheaval.

Wellbeing, happiness and suicide

Stephen Brosnan of UCC will present a paper on the socioeconomic determinants of suicide rates in Ireland, which finds that economic indicators are found to have a significant effect on suicide rates in Ireland.

However, consistent with previous studies, the results differ across gender. Furthermore, demographic and social factors have contrasting effects across gender groupings in Ireland.

Females tend to be more sensitive to changes in social and demographic factors while increases in the divorce rate are found to be positively related to female suicide rates and being negatively related to male suicide rates.

Giovanni Perucca of the Politecnico di Milano will discuss the negative effects of living in a large city on happiness. He argues that the effects of living in a city are different for different categories of city dweller.

Professor Philip Morrison of Victoria University of Wellington will talk about how city-living raises the income and well-being returns to those with tertiary education while depressing the real income and well-being of the less qualified.

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