On 14 April the New Statesman published an article which was intended to show that the Irish economy is booming at the expense of ‘Brexit Britain’. This conclusion was backed by some striking graphics, which are still being gleefully shared by the usual suspects.

But it was also baloney. People have been taken in here by what Paul Krugman has called ‘leprechaun economics’ (or, if you prefer, ‘shamrock economics’, with the emphasis on ‘sham’).

The one strong point in the article was that the Irish economy has benefited from relatively low rates of corporation tax. You might normally expect the New Statesman to rail against ‘tax havens’ and ‘profit shifting’, but presumably that would have muddled the anti-Brexit message here.

So no mention either of concerns that the Irish economy has become too dependent on revenues from multinationals, with more than half of corporate tax being paid by just ten companies. Or that more than a third of Irish goods ‘exports’ are not actually produced or physically traded in the country.

But the real low point was the chart below, which is hopelessly misleading.

For a start, ‘current US dollars’ is a poor basis for comparing the sizes of any economies.

In part this is because this measure does not adjust for inflation. This matters here, because the cost of living in Ireland is one of the highest in Europe, and even higher than the UK.

What’s more, it makes little sense to compare GDP using current market exchange rates, because these can swing wildly with little impact on the underlying economies. This point was well made by Jonathan Portes last year, when debunking Mark Carney’s equally absurd claim that the UK economy had shrunk from 90% the size of Germany’s to less than 70% as a result of Brexit.

However, the worst mistake is to rely on Irish GDP data at all. You can tell something is fishy just by adding a few more countries to the New Statesman’s chart, as I do below. Ireland’s per capita GDP may now be twice that of the UK (after overtaking in 2001), but, on this flawed basis, it is also now at least twice that of Germany (overtaken in 2000), France (1999), and Italy (1997)!

The pitfalls here are well-known. The New Statesman article does grudgingly acknowledge that ‘Irish GDP figures are typically inflated by foreign multinationals reporting profits in the country’. This is a massive understatement.

In reality, the Irish GDP data are so heavily distorted by the activities of multinationals that no-one pays them much attention – even the Irish themselves.

The basic problem, as explained by the Irish national statistics office, is that ‘a lot of Ireland’s GDP includes profits that are generated here but then go straight out to the owners of companies abroad.’

This is the main reason why the Irish themselves prefer to use Gross National Income (GNI), which differs from GDP by the net amount of incomes sent to or received from abroad, or a modified version of GNI, known as GNI*, which, among other things, excludes the depreciation of intellectual property and leased aircraft.

In 2021, Irish GDP was about €426 billion (at current market prices), but GNI was only €324 billion, and GNI* was just €200 billion (or €46,668 per capita), which is a huge difference.

Even GNI* is flawed, because it cannot strip out all the globalisation effects. For this reason, Irish economists tend to put more weight on measures of household income and expenditure.

For example, the chart below compares real consumption expenditure for households and NPSIHs (Non-Profit Institutions Serving Households, a relatively small part of the total), which obviously tells a very different story. If Irish incomes really are twice those in ‘Brexit Britain’ then it’s about time someone told the Irish…

The former Governor of Ireland’s central bank, Patrick Honohan, explored this further in 2021 when he tackled the question “Is Ireland really the most prosperous country in Europe?”. In particular, he looked at an alternative measure of household welfare known as ‘actual individual consumption’ (AIC). Ireland’s AIC per capita was only about 95% of the EU average in 2019, down from 115% in 2006, and lower than the UK.

The New Stateman also published this chart, which again has been widely shared. You are meant to draw the conclusion that i) the UK will do badly in 2023 because of Brexit, and ii) this explains the strong performance of Ireland.

And again it is misleading. For a start, Irish GDP has been ‘soaring’ for many years, as my chart below shows. Growth of around 5% in 2023 would actually be the weakest since 2016 (the year after GDP rose by a whopping 25%, thanks in part to Apple’s decision to shift its intellectual property assets to Ireland).

Indeed, even before ‘leprechaun economics’, it was normal for Ireland (a relatively poor country) to grow more quickly than the UK. Average annual growth in Irish GDP was 6½% between 1990 and 2007, compared to ‘just’ 2¼% in the UK.

Take a look also at the other countries near the top of the 2023 GDP growth table (Malta, Romania, Slovakia, Spain, Greece, Croatia and Portugal). They are all either poorer countries, which tend to have higher growth rates than richer ones, or economies which are likely to benefit most from the post-Covid recovery in tourism, or both. Ireland arguably still falls into both categories too.

If you look at the larger economies in the bottom half of the table, there really is little difference between the numbers for the UK and, say, Germany or France – once you allow for the inevitable uncertainty around any forecast. What’s more, these ‘projections’ are already out of date. In particular, the OBR’s March forecast assumed that UK GDP would fall by 0.4% in Q1, but the latest monthly data suggest it actually rose by about 0.2%!

The New Statesman article also fails to provide any hard evidence of a boost to the Irish economy from Brexit. All it can offer is a few soundbites, some carefully selected trade data (distorted by Covid), and the observation that some financial assets (but very few actual jobs, or the accompanying tax revenues) have moved from London to Dublin.

This is not to say, of course, that the UK economy doesn’t have big problems, including dysfunctional energy and housing markets, and the rising tax burden. But pinning these on Brexit is just lazy, and the recent attempts to contrast ‘Brexit Britain’ with ‘booming Ireland’ are, frankly, cobblers.

• Applied economics
• Brexit
• Trade policy
• UK economy