If britain leaves the European Union, the cost to the Irish economy could reach €3 billion a year according to a new study.

An analysis by the Economic and Social Research Institute (ESRI) suggests a Brexit could have serious consequences for Irish trade, with a reduction in bilateral trade flows between Ireland and the UK of 20 per cent or more.

Irish companies and those close to the border, which rely on sales to Northern Ireland would, be most affected. According to the ESRI, the reduction in foreign direct investment in the UK as a consequence of the Brexit would be damaging to the Irish economy.

Though there are suggestions that additional projects may relocate to Ireland, the institute said this change would be very small and, in fact, countries like Germany, France, Italy, Spain and Poland would benefit more.

A Brexit could also mean increased energy costs for Ireland.

If the electricity market in Britain remains independent of the rest of the EU, interconnection with Britain only would leave Ireland vulnerable to any problems in the British market. Under these circumstances enhanced interconnection between Ireland and the rest of the EU could provide a useful but costly diversification, reducing risk for Irish consumers.

If Ireland was forced to build a new interconnecter with mainland Europe, the cost could be upwards of €10 billion.

The British government is committed to holing a referendum on a Brexit following negotiations on key issues of concern for the UK.

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