Steering SMEs Through Brexit

SteeringSMEsmain

Highlights

  • About 90% of Irish businesses are SMEs – and over 40% of their exports go to the UK
  • The British Irish Chamber of Commerce, which represents businesses in both countries, has called on the Irish government to ease the path of SMEs through Brexit
  • Recommendations from business leaders include tariff- and border-free trade, and the possibility of exemptions for the agri-food sector, whose total exports to the UK are worth almost €5bn

 

Amid all the possible impacts of Brexit, SMEs could be among those that are hardest hit.

A whopping 90% of Irish businesses are small- or medium-sized enterprises, and over 40% of their exports to go the UK – proof, if it were needed, that SMEs need to be prepared for Brexit.

“Brexit is a massive threat to Ireland’s small businesses,” says Brian McGurk, brand experience director of Dublin- and London-based BrandCreate, and a committee member of the British Irish Chamber Of Commerce (BICC). “Ireland’s greatest export market is the UK, Britain has always been the land of opportunity for Irish firms, and we’ve never been more closely converged than we are now – yet Brexit could put all this at risk.”

The BICC, which represents and supports businesses with interests in both countries, is calling for the UK and the EU to form a new customs arrangement, which it says would maintain Ireland’s close business ties with the British mainland.

“We need an alignment of tariff regulation,” says Katie Daughen, the BICC’s head of Brexit policy. “Over 40% of Irish SME exports go to the UK, but if the UK leaves the tariff-free single market, the likely new tariffs to trade with Britain would hit Irish traders very hard. The average is around 4%, but agri-food, one of Ireland’s main trade relationships with the UK, has tariffs of up to 60%.”

If Brexit goes ahead without a trade deal, the UK would be forced to do any business with Ireland – and the rest of Europe – under World Trade Organization (WTO) rules, and Irish companies doing business with or the UK would be subject to the EU’s Common External Customs Tariff. But there is an answer, says the BICC.

 

A new type of customs union

“We believe it’s possible to work out a new trade framework in the form of a customs partnership between the UK and the EU that rules out the need for a border on the island of Ireland and enables tariff-free trade in goods, managed movement of people and skills and facilitates a comprehensive trade deal in services,” says Daughen.

The BICC points to the EU-Turkey customs union as a precedent that, it says, provides a model to build on. Businesses were encouraged in December by UK prime minister Theresa May’s announcement that sufficient agreement had been made on the border issue – suggesting frictionless trade with the EU and a bespoke arrangement for Ireland, although she didn’t specify what the agreement would be.

But many Irish SMEs are awaiting clarification – and none more so than the agri-food sector, which had a €1.1bn trade surplus with the UK in 2016 and whose total exports were worth €4.8bn.


“The UK and Ireland have the same strengths, the same values, the same struggles. Ours is only a difference in scale, not in culture”

Brian McGurk, Director, BrandCreate


“Hopefully, the UK will keep its promise of a borderless Ireland and keep the east-west trade link to Europe flowing freely,” says BICC member John McGrath, head of business development at Kildare-based Dawn Farms, the Irish Exporters Association’s Irish Food and Drink Exporter of the Year in 2016.

“Ireland is the country most impacted by Brexit and agri-foods the greatest affected sector within that. We’ve already been hit hard by Brexit and its impact on sterling so now we need to protect integrated supply chains and work to prevent the imposition of WTO tariffs and any unnecessary delays to customs and logistics.”

 

Border lines

At the centre of the Brexit conundrum is the border between Ireland and the UK. Says McGrath: “Hopefully it will be seen that our border is so unique that some individual deal will be done. The reading of the tea leaves is that the UK may rule out a single market and customs union, but maybe the suggested bespoke customs union could exempt pan-European agri-food trade, which would be welcomed by other major agri-food exporters such as the Netherlands, France, Spain and Denmark.

“In any event, border checks are now far more about compliance, and if we had a borderless island, we would want the UK, which has led the way on high food standards, to uphold a regulatory alignment with the EU to ensure standards continued to be upheld.”

The BICC has called on the Irish government to ease SMEs’ path through Brexit with a series of measures, including a reduced lower rate of employer PRSI, a marketing grant for Irish SMEs exposed to the UK and a voucher scheme to help them deal with customs for the first time.

Meanwhile, all BICC members are backing at least a three-year transition period – which, on current evidence, says Daughen, is much needed.

“A huge number of Irish businesses – around 80% – haven’t yet put in place a Brexit contingency plan. You need to know the risks – we’re advocating a soft Brexit, but you should prepare for the worst-case scenario. With still no firm lead on what the UK’s EU departure will mean, we also believe a lengthy transition is vital to help organisations prepare.”

McGrath agrees: “The transition period should take us up to at least December 2020 to give SMEs a chance to plan how to adapt. You could diversify, but that takes time. Or you could invest in your UK operations, which is a viable option for us – but remember that the UK is less than 60% self-sufficient so you’d still have to import the raw materials and be subject to tariffs on that.

“As a company with an international reach, Dawn Farms is adopting a close watching brief on Brexit, staying close to our UK customers and supporting the credible alternative being championed by the BICC.”

 

No time like the present

Ultimately, however, the goal of the BICC is to ensure Irish SMEs can continue to benefit from Ireland’s unique geographical, cultural, social and commercial ties with the UK. “It’s easy to talk glibly about SMEs as just an acronym,” says McGurk, “but these are people’s lives, family businesses, independent contractors, partnerships. These SMEs don’t have time, like a big business, to write a Brexit-busting plan. What we need is a clear signal that Ireland is a special friend to the UK.

“Ireland are still the poster boys of the world. We rallied from recession, we were the first up and out, proving our resilience and how visionary we are. We’re a great partner for Britain,” adds McGurk. “The UK and Ireland have the same strengths, the same values, the same struggles. Ours is only a difference in scale, not in culture. We all need to see the value in admitting the special relationship our countries have, and investing in it.”

 

By ContentLive

For information about how the BICC is supporting SMEs with interests in Ireland and the UK, visit their website.

 

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