A HARD BREXIT would increase the cost of living for all households in Ireland by 2% to 3.1% – an annual increase of €892 to €1,360 per household, according to the Economic and Social Research Institute (ESRI).

Costs would rise the most for lower-income households, as these spend a greater share of expenditure on food products, many of which are imported from the UK and would be subject to tariffs.

Households with the lowest incomes would face a 4% price increase in the highest-impact scenario, whereas households in the highest-income group would face a 2.4% price increase, the ESRI said.

The percentage increase faced by the poorest households would be 70% more than the percentage increase faced by the wealthiest households, according to the research.

The study was commissioned by the Competition and Consumer Protection Commission (CCPC) and examines the shares of imported products from the UK in household spending and estimates effects of a hard Brexit scenario, incorporating tariffs and other increases in costs of trade between the EU and the UK.

Cost of milk and bread

The research used a number of Brexit scenarios to examine the price increase of a range of imported goods. It found that if tariffs were introduced and other trade costs also increased following a hard Brexit, the price of bread and cereals could rise by up to 30%, while the price of milk, cheese and eggs could increase by 46%.

Martina Lawless, one of the report’s authors, said: “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.

Isolde Goggin, chairperson of CCPC, added: “The implications of the research highlight an important opportunity for domestic businesses, particularly the food industry, in the form of import substitution.”

The estimates in the report do not take into account switching of products or changes in expenditure patterns in response to the cost increases. For this reason, the ESRI said they are likely to reflect the maximum increase in the cost of living.