UK firms stocking up to avert a potential fallout from a hard Brexit could provide a temporary boost to Irish food and drug firms exporting to the UK later this year, an economist has said.
Chief economist Philip O’Sullivan at Investec Ireland said the bank will be closely monitoring the contingency plans by British firms should stalled UK talks with the EU appear to be heading toward a no-deal Brexit, which could lead to increased orders for regulated goods such as drugs and many types of foods.
“One of the things we are tracking is whether there will be a step up in exports in the second half of the year,” Mr O’Sullivan said.
“There have been a lot of stories in the media about the risk of disruption to imports in the UK of foods and drugs in case of a hard Brexit. We would not be surprised to see a step-up of exports from Ireland into the UK, on a precautionary basis over the next couple of months,” he said.
Something similar happened in recent months when US exports of soybean to China surged ahead of the introduction of trade tariffs.
In Ireland, pharmaceutical exports by the multinational drug companies based here slumped five years ago when global patents on some blockbuster drugs expired around the same time.
More recent examples of regulatory change affecting trade include the Government’s regulations for plain packaging for tobacco products which triggered a spike in imports by tobacco companies.
“There could be small benefits for the real economy as extra shifts are put on in [pharmaceutical] plants”, Mr O’Sullivan said, while the Government’s corporate tax revenues could rise should the additional activity lead to increased profits for the big drug firms.
“Obviously no one here wants to a hard Brexit, but there could be a tailwind into Britain behind Irish exports later this year,” he said.
It was too early for exports figures for the first half of the year to show any such influences.
Irish exports to the UK slumped 7% to €6.74bn in the first six months of the year from the same period in 2017, new CSO figures showed.
However, two industries — chemicals and related products and transport machinery, which includes aircraft, played an outsized role in the exports declines to the UK.
Other exports associated with Irish-owned firms were relatively resilient despite the Brexit uncertainty and the continued weakness of sterling against the euro which makes it less profitable for many firms here to sell into the UK.
Exports of food and live products rose to €1.93bn in the first six months, an increase of €66m from the same period in 2017. Those industries provide a huge number of jobs in Ireland.
The six-month period showed “a pretty stable performance when you consider the headwinds from a weak sterling it is quite a creditable performance” said Mr O’Sullivan.
A jump in the value of imports of fuels from the UK, to almost €1.5bn in the first six months from 2017 reflected the surge in global oil prices.
Exports to the rest of the EU which surged 23% to €27.53bn were boosted by large increases in sales of chemical and pharmaceuticals.
And despite global trade spats, exports to the US surged 8% to almost €19.5bn, with chemicals and related products also having an outsized role.