A hard Brexit could push up consumer prices by 2% to 3%, adding between €890 and €1,360 to the annual spend of the average Irish household, according to new research from the ESRI.
The estimated increase in consumer prices would arise from the imposition of tariff and non-tariff trade barriers as a result of Brexit to imports from the UK.
Ireland imports a far greater share of what it sells to consumers from the UK than any other European Union country, and would be far harder hit by additional costs on UK imports.
Minister for Finance Paschal Donohoe has said the ESRI report further indicates the challenges a hard Brexit could pose for the Irish economy.
He said the Government had been the first to articulate the need for a transitional agreement to allow negotiation to take place on a future trading relationship between the EU and the UK.
He said Ireland had a stake in a successful trading relationship being secured because if it could be secured, it offered the best prospect of avoiding a hard Brexit and avoiding the kind of price increases that the ESRI report indicated today.
Asked about the fears of people in individual households of significant prices rises, Mr Donohoe reiterated that the decision to leave the EU was taken by the UK.
He added that as that decision was being made, the Government had articulated that it would have consequences for the Irish economy.
The minister noted that the Government has already adjusted its growth forecast for the next number of year to take account of that.
He added that the report and its economic premises were based on a set of events happening that the Government will do its best to manage in the context of tryinig to secure a successful trading relationship between the UK and the EU.
The cost increase would also fall disproportionately on the poorest households, as they tend to spend more of their money on the type of goods that would be hit with the highest tariffs, notably food.
The study - carried out for the Competition and Consumer Protection Commission - finds that the price of bread and flour from the UK could rise by up to 30%, while milk cheese and eggs from Britain could go up by 46%.
Hard Brexit could add €890-€1,360 to the annual spend of households pic.twitter.com/oRJb8aKcMZ— RTÉ Business (@RTEbusiness) March 21, 2018
The poorest income groups allocate up to 15% of their spending for food items, but in the richest social group food accounts for just 8% of spending.
Food products have the highest tariff rates in the World Trade Organisation tariff listings.
A fall in imports from the UK may also lead to lower levels of competition, which other studies have indicated would likely lead to local producers raising their prices to consumers.
Associate Research Professor with the ESRI Martina Lawless warned that price increases could result in food products disappearing from Irish shops.
She said that, if consumers stop buying a particular product, then it may not be viable for shops to stock it.
Additional reporting: Ingrid Miley