Simon McAlister Lead of the Brexit unit in EY shares Economic and Brexit Update.

1. 21 October 2020
Simon MacAllister
Brexit Lead | EY Ireland
Economic and Brexit
update

2. Might the recovery
stall?

3. Global forecasts have begun to settle and even improve
21 October 2020
Oxford Economics real GDP forecasts, January – September 2020
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
Spain France India Italy UK Eurozone Greece Ireland Germany Japan Canada Brazil World Sweden US China
GDP forecasts over time
Sep-20 Feb-20 Apr-20 Jun-20

4. GDP Consumption
Government
spending
-6.1% -19.6% +7.5%
Ireland’s contraction beats expectations
21 October 2020
Source: CSO, September 2020; percentage change on previous quarter, seasonally adjusted
Investment Exports Imports
-69.8% -3.1% -35.5%
ROI : 2020 Q2 national accounts (QoQ growth)
GDP Consumption
Government
spending
-20.4% -23.1% -14.0%
Source: ONS, September 2020; percentage change on previous quarter, seasonally adjusted
Investment Exports Imports
-25.5% -11.3% -23.4%
UK: 2020 Q2 national accounts (QoQ growth)

5. External orientation clear when compared with UK
21 October 2020
Open economy insulates Ireland – 2019 GDP components
Source: CSO; 2019 annual GDP shares
Consumer economy exposes UK - 2019 UK GDP components
Source: ONS, 2019 annual GDP shares
GDP = c.€356bn GDP = c.£2,216bn
Exports
127%
Imports
116%
Investment
47%
Consumers
31%
Government
10%
Exports
31%
Imports
32%
Investment
17%
Consumers
65%
Government
19%

6. Outlook for a partial recovery (but not a bounce back to before)
21 October 2020
ROI forecasts (2020 GDP base case)
-6.2% September
-1.7% September
-10.8% August
-9.0% July
-8.5% June
-11.1% June
-6.8% June
-10.5% May
-12.4% May
-10.5% April
ROI UK NI
2018 8.5% 1.3% -0.5%
2019 5.6% 1.5% 1.7%
2020 -10.8% -10.1% -10.4%
2021 6.6% 6.0% 5.5%
2022 3.8% 2.9% 2.1%
2023 2.9% 2.1% 1.8%
2024 2.6% 1.9% 1.5%
2025 2.5% 1.6% 1.8%
Other forecasters
Source: EY Economic Eye, UK ITEM Club
Latest EY outlook

7. Labour market
improving but impact
severe

8. Labour market data complex to unpick
21 October 2020
Measuring disruption – peak levels
ROI – 2.3m labour force
Live
register
Wage support
scheme
602k
Early May
+43K
May
c.420k
Early May
PUP
scheme
Claimant
count
Furlough
+35K
May
Self-employed
scheme
NI – c.895k labour force
249K
July
78K
July
c.360k
Current estimate
c.210k
Current estimate
c.103k
(78k fully/25k partial)
Current estimate
c.32k
Current estimate
c.33k
Current estimate
5.2%
28.5%
15.4%
6.8%
0%
5%
10%
15%
20%
25%
30%
ROI traditional rate ROI Covid-adjusted rate NI rate
Monthly unemployment (ROI and NI)
Source: HMRC, ONS, CSO, Revenue.ie Source: NISRA, CSO, Revenue.ie

9. Tentative signs of recovery from early data
21 October 2020
Overall output expanded
for the 2nd month in a
row
51.7*
(vs 54.5 in July)
Decrease in employment
in all sectors
42.3
New orders growth
contracted significantly
45.1
(vs 51.9 in July)
Services sector expanded
for the first time in 17
months
51.2
Source: AIB PMI August 2020 Source: Ulster Bank PMI, August 2020
*A score of 50 denotes growth, below 50 denotes contraction
Services activity
expanded as new
business increased for
the first time since
February
52.4*
Manufacturing activity
expanded
52.3
but at a slower pace
than July (57.3)
Employment levels fell in
both manufacturing and
services (for the sixth
month running in the
latter, the longest period
of decline in almost nine
years)
Output prices fell in
both sectors
ROI NI

10. Macro volatility to be expected – Brexit/ Covid
21 October 2020
Yahoo Finance, 21 September 2020
Since 1 Feb
- 20% FTSE 250
- 18% NASDAQ
- 11% ISEQ
10,000
12,000
14,000
16,000
18,000
20,000
22,000
24,000
2015 2015 2016 2017 2018 2019 2020
£
FTSE 250
29-Feb
Covid case confirmed
in ROI
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
Eurobuys£/$
Euro buys X Dollars
Euro buys X Sterling
Bank of England, 21 September 2020
29-Feb
Covid case confirmed
in ROIBrexit vote
Euro getting stronger
Exchange rate, € buys, 2000-2020

11. Outlook?

12. Consumer behaviour in flux – but hope in the data
21 October 2020
EY Future Consumer Index, July 2020
Cut deep
16%
Save and stockpile
34%
Stay calm, carry on
34%
Key segments now Key segments next
Consumer segments that have emerged from the crisis are expected to evolve further in the near and long term
Hibernate and spend
17%
Keep cutting
8%
Back with a bang
11%
Stay frugal
21%
Get to normal
40%
Cautiously extravagant
20%
Affordability first
32%
Experience first
10%
Health first
25%
Planet first
17%
Society first
16%
Key segments beyond

13. Not the only thing to think about
Debt
Social inequality
Environment
Tax
21 October 2020
Quality of life
Brexit

14. No deal Deal:
Basic FTA
Deal:
Comprehensive FTA
What follows the end of the transition period?
21 October 2020
There will not be an extension to the transition period, so we are left with:
50
%
50
%
0%

15. 1 2 3
Readiness
status
No preparations Initial preparations
(Brexit assessment underway)
Brexit ready
(Readiness assessment completed)
Selected
actions to take
Full readiness
assessment
Review initial
diagnostics
Validation
exercises
Brexit readiness: Which stage are you?
21 October 2020
Brexit Strategy
• What will change?
• How much will this cost?
• What should be done to prepare?
• Update gap analysis
• COVID-19 pandemic overlay
• Prioritise and move to planning
• COVID-19 pandemic overlay
• Stress test existing plan
• Have implementation trigger
points been met

16. 21 October 2020
Being Brexit ready
People
• Mobility
• Availability
• Retention
• Workforce strategy
• Tax
Economics
• Macro trends
• Demand
• Sentiment
• Forecasting
• Scenario planning
IT/systems
• Process readiness
• Customs data
• IT investment
Strategy
• Restructuring and
relocation
• Market analysis
• Operational
planning
• Acquisition and
divestment
• Offshoring/
onshoring
Treasury
• Funding
• Tax
• Currency
Trade
• Northern Ireland
• Tariffs
• Routings
• Customs
• Regulatory
• VAT
• Services
Supply
chain
• Sourcing
• Logistics
• Stock
• Locations
• Market access
• Storage
Brexit
risk
areas
Legal and
regulatory
• Customers
• Suppliers
• Distributors
• Licenses/permits
• IP
• Legal entities

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