Brexit: The road ahead for Irish firms

Britain has served its separation notice and talks over the divorce terms start soon. An all-island

Brexit: The road ahead for Irish firms

Over the past week, we have witnessed events of great symbolic importance. Article 50 of the Lisbon treaty has been triggered by the British government and its so-called Great Repeal Bill has been introduced into the Houses of Parliament. Great swathes of EU legislation will now be transposed into Britishdomestic law allowing for greater certainty in the conduct of peoples’ affairs. It remains to be seen just how many of those laws survive over the long run. A cloud of uncertainty hangs heavy, in particular, over those of us on the island of Ireland, most of whom have played little or no part in the decision on the part of the citizens of the UK, to depart from the EU.

Towns such as Clones, in Monaghan, seem remote from Westminster where much of the action has been taking place, but it and fellow border districts could be deeply affected. A sense of just how severe the effects could turn out to be is contained in a report by the Frontline project which was published last week by Chambers Ireland. Thirty members from various locations along the border — from Dundalk to Letterkenny— were interviewed on the record for the project. Some of the views aired are somewhat alarming, though counsels of despair do not predominate. These are business people, after all.

We are familiar already with some of the key issues: The possible impact on the 30,000 people who cross the border on a daily basis to earn their living, not to mention supply chains both within the island and beyond. As John McGrane of the British Irish Chamber of Commerce points out, more than €5bn worth of goods was traded across the border last year. All the wheat grown on the island is processed north of the border along with 40% of chickens bred in the Republic, and 30% of milk produced up North is processed in the south. Since June, trade has been impacted and investment projects have been frozen.

Paddy Malone of Dundalk Chamber of Commerce believes that over the years, currency volatility has held back investment on both sides of the border. This is due to the difficulty on the part of would-be investors in coming up with the sort of five-year projections that bank managers seek. The slide in the value of sterling since June 23 has not helped, obviously. When sterling is worth 90 pence to the euro, Newry’s catchment area starts at Swords, he argues. the UK currency has settled back at a somewhat higher level but is subject to downward spurts, often driven by political events. Sterling’s weakness was evident in the first period after the vote. However, since the turn of the year, the focus has turned to the potential disruption from the imposition of border controls under a hard Brexit scenario, one that since January has come to appear increasingly likely. British Prime Minister Theresa May sought to ease concerns on this score in the Article 50 letter sent to the EU leadership last week. The UK government emphasises the importance of preserving the common travel area between Ireland and Britain and there is confidence that new technology will greatly ease matters. Everyone accepts that the reintroduction of old style border posts would be acutely disruptive to peoples’ ordinary lives and to relationships within and between these islands.

The Road Haulage Association has expressed confidence that technology will offer solutions. But how this will be achieved in the event of a British departure from both the single market and the customs union remains to be seen. The Irish Government will be pressing for the island to be treated as a special case and the EU appeared to take account of this position in its response to the Article 50 letter. But it will be interesting to see whether such a flexible approach will survive once the divorce talks get going in earnest.

Catherine Day, who was until recently the secretary general of the Commission, has apparently warned that discussions are likely to get acrimonious. It is not hard to envisage how this could happen. First, there is the discussion over the amount said to be owed by Britain to the remaining EU 27. Next, there are the various curved balls that can be thrown. On Friday, the future of Gibraltar was suddenly highlighted as Spain appeared to secure leverage over the discussions. Against this background, Thomas McEvoy at the Louth Local Enterprise Office is advising firms to start crunching the World Trade Organisation (WTO) numbers to determine the likely impact of a disorderly departure. Given the high level of tariffs applying to agricultural goods in particular, agri-business finds itself especially exposed. Irish agriculture contains everything from world beaters, like Kerry Group and Glanbia on the one hand, and small farms run in large part by elderly proprietors unaccustomed to rapid change. Of all counties, Monaghan could be the most exposed to the downsides of Brexit given the size of its agri-sector. The county hosts plants from Kerry Group, as well as Monaghan Mushrooms and the Town of Monaghan Co-op. Town of Monaghan has merged with Ballyrashane to form Lacpatrick, with a combined turnover of €360m. Around €45m is being invested north of the border by a group which has clearly hedged its Brexit bets.

Its CEO, Gabriel Darcy hints at harder times to come, however: “It is fair to assume that the UK government will not countenance food price inflation as a result of Brexit.” Read between the lines and what we are talking about is a return to the old British cheap food policy. Retailers too are exposed. Many depend heavily on UK suppliers, with relationships built up over decades. Manufacturers fear a period of uncertainty lasting five, six years or more, with projects put on hold. The agencies argue for export diversification, but building new markets takes years. The Government will have to step in to address gaps in export credit insurance availability and permission from the EU will have to be secured for funding aimed at assisting smaller less well-capitalised firms. People such as Teagasc director Gerry Boyle talk of the need for greater innovation, but here too, additional capital will be required. Perhaps, more attention should be paid to building cooperation among firms exporting from the region. The border region had been in recovery following a long downturn. Counties such as Leitrim have been benefiting from a dramatic rise in inbound tourism from the North, but a hard Brexit could throw all of this into reverse. JJ O Hara of Leitrim Tourism warns that people are already asking whether the Troubles are set to return. Clearly, political uncertainty is already having a chilling effect on business.

The response to Brexit from governments north and south needs to start now. Consideration needs to be given to an all-island industrial promotion body. It has worked well in tourism. Brexit threatens to exacerbate the economic gap between rural and urban Ireland. A State response, with backing from the EU, is required. In the past, Brussels has been willing to accept exceptional measures aimed at boosting activity in eastern German and before that in Berlin before the fall of the Wall. Above all, parties to this politic-marital dispute need to be aware that if they give into the temptation to tear strips out of each other, everyone across Europe will surely lose. Let people express their anger and frustration — and then get down to work in crafting a continental settlement.

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