Central Bank chief says Ireland must plan for no-deal Brexit in January

The Governor of the Central Bank, Gabriel Makhlouf, said Ireland must plan for a diverge between the UK and European Union economies, potentially as soon as January 1st when the current transition period is due to end.

“Too many people were hoping the transition period would carry on for ever,” he warned.

Fears of a no-deal Brexit, with the UK crashing out without a new trade agreement, have risen in the past week after British prime minister Boris Johnson’s government indicated it wants to tear up parts of the Withdrawal Agreement signed earlier this year.

“It would be wise to plan on the basis that there won’t be a deal (before the January 1st exit date) and there will be a hit,” Governor Makhlouf said.

Speaking at an event organised by the Institute for International and European Affairs (IIEA) in Dublin he said the Central Bank has previously estimated a crash out Brexit will cost the Irish economy 1pc to 2pc of GDP, but he said those estimates need to be reviewed.

While the Central Bank here believes a no-deal Brexit will hurt the Irish economy regulators believe the financial system as a whole here is ready for Brexit, whatever shape it takes.

However, even if there is a new trade agreement before January the future trading relationship between the UK and Ireland will not be as close has it has been inside the EU and that will have an impact, he said.