The Central Bank has been working on reducing the risks to the financial system arising from Brexit since before the 2016 referendum.21 While the first order risks to and from the financial system have been largely mitigated, there will still be negative impacts for the economy and for businesses once the transition ends, particularly if no deal on future trading relations is agreed.
It is likely that the interaction of Brexit and COVID-19 will be different across sectors and the extent of overlapping exposure to the two different shocks is an important consideration for the near-term economic prospects.22 With some vulnerable sectors (for example, tourism and accommodation and food services) already experiencing large demand shortfalls, it is possible that losses that would have been triggered by Brexit effects have been brought forward due to the impact of COVID-19.