Preparing the economy for the best and worst Brexit outcomes

With less than six months to go and the outcome of negotiations still up in the air,Brexit was always going to loom large over the budget. Reiterating last year’s speech that Britain’s departure from the EU represented the biggest “political, economic and diplomatic challenge of our generation”,finance minister Paschal Donohoe devoted a fair chunk of his spending initiatives to money allocated to mitigating the worst effects of Brexit on the economy.

“Across government the necessary measures to prepare for Brexit are being put in place. Those plans are based on a central case that there will be agreement in the coming weeks. However, the possibility of a no-deal Brexit has influenced decisions we have made regarding our finances, balancing our books and investing in our capital infrastructure,” the minister said.

That translated into a number of measures including spending commitments of more than €700 million. Some €300 million of this will go towards a loan scheme for small businesses and the food and agriculture sectors, which follows on from the €300 million Brexit loan scheme announced by Donohoe a year ago.

there is no way of knowing just yet whether it will be enough, or whether any figure could make the economy withstand the damage of a hard Brexit

There will also be a further €300 million for a “human capital initiative”, to be spent over four years from 2020 to 2024 - essentially extra money on education and training. Some €110 million has been allocated to government departments to prepare themselves for Brexit.

These are not insignificant amounts of money. Still, there is no way of knowing just yet whether it will be enough, or whether any figure could make the economy withstand the damage of a hard Brexit.

There is little the government can do to offset against the impact Brexit has already had on the economy: the weakness of sterling since the vote more than two years ago. There is no shortage of anecdotal evidence that many companies who export solely to Britain are seeing their margins squeezed by currency movements. That will only increase if a disorderly exit occurs in March. In the face of that loan schemes will be of little use.

And it puts into perspective the decision to hike the Vat rate on the hospitality sector from 9 per cent back up to 13.5 per cent. Even after a surge in tourism numbers from the US and Europe, Britain remains the single biggest source for overseas visitors. If sterling tanks further, how many British visitors will make the trip across the Irish Sea?

Still, few could fault the government’s extensive preparation for Brexit, not just on budget day but since the vote happened.