March 21, 2018 / 3:57 PM / a year ago

Irish consumer prices may rise by 3 percent in "hard Brexit"

DUBLIN, March 21 (Reuters) - Irish consumer prices might rise as much as 3.1 percent, or 1,360 euros per household, if Britain’s exit from the European Union leads to tariffs being imposed on goods coming into the country, a government-funded research body said on Thursday.

Ireland’s export-focussed economy is considered the most at risk among EU members to Brexit because of its trade links with Britain. But Ireland imports twice as much from Britain as it exports.

A “hard Brexit” - where Britain’s trade with the EU would revert to World Trade Organization rules, introducing tariffs and other trade costs - would increase the cost of living for all Irish households by 2 to 3.1 percent, the Economic and Social Research Institute (ESRI) found.

By comparison, the average cost of living in Britain would rise 1 percent in the same circumstances, the National Institute of Economic and Social Research found last year.

Costs would also rise most for lower-income households, by up to 4 percent, in the highest-impact scenario. The price of bread and cereals would rise 30 percent. Milk, cheese and egg prices might go up 46 percent.

“As Ireland imports a considerable amount of food products from the UK, a hard Brexit could have an immediate impact on the cost of living. Unfortunately, we find that this impact would likely fall disproportionately on lower-income households,” said Martina Lawless, one of the report’s authors.

British household names such as Debenhams, Marks & Spencer and Tesco, Ireland’s second-largest supermarket operator, have a major presence in Ireland. Supply chains are also closely integrated between the two countries.

The ESRI’s estimates were calculated in the absence of any change in consumer behaviour. German discount supermarkets Lidl and Aldi, for example, have increased their share of the Irish market to 21 percent in recent years.

So far, Brexit has had the opposite effect on prices. A decline in the value of sterling against the euro has made imports cheaper and helped keep inflation almost non-existent despite rapid economic growth.

Negotiations on the future trade partnership between Britain and the EU are due to start next month. London hopes for a uniquely close relationship, but Brussels warns that refusal to accept single market or customs union rules will lead to unavoidable frictions in trade. (Reporting by Padraic Halpin, editing by Larry King)

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