Since the Brexit referendum of June 2016, Britain’s exit from the EU has increased uncertainty across European markets. As a close neighbour and economic partner of the UK, Ireland will feel the consequences of change. This will create both challenges and opportunities for our clients in the SME sector (small and medium sized enterprises).
Economic Facts of the UK-EU Relationship
The European market is closely integrated and, as the European bloc expanded over the decades, the trend has generally been towards greater collaboration and integration. Today, the EU is the UK’s largest trading partner, accounting for 44% of UK exports and 53% of UK imports. Some EU members rely significantly on the British market; there are four countries for which exports to the UK account for more than 5% of their GDP (Ireland is one of them with a share of about 5.5%).
Impact of Brexit on currency markets and supply chains
Brexit will have consequences for the currency market, affecting both the value of Sterling and the Euro, with higher uncertainty and worries about future economic growth expected to dampen the pound. In addition, slower economic performance in the EU will drive the Euro lower. Recent fluctuations in the currency market seem to reinforce the idea that Brexit will have a negative impact on the pound, rewarding British exporters for the time being, and hurting importers.
Brexit will also have an impact on trade, and may negatively affect supply chains. Trade barriers and tariffs will increase costs for Irish SMEs, with the UK being our largest export market.
Opportunities for Irish Businesses
However, Brexit is also an opportunity for Irish SMEs. On the one hand, trade restrictions caused by the process will undoubtedly result in higher costs for businesses targeting the UK market.
On the other hand, Ireland is in the unique position of being both a member of the EU (and getting all the benefits of this status), and having a close proximity to the UK market. There is also the possibility of special conditions for Ireland that, together with our stronger cultural and historical ties to the UK, should make Irish firms more competitive compared to the rest of the EU, and helps us maintain our market position.
Also, the Euro is also likely to depreciate, so this will benefit Irish firms targeting foreign markets beyond the UK. Irish firms will have to adapt to changing conditions, as the UK market may become less attractive in the future and the focus should turn to continental Europe. While some sectors (e.g. the financial sector) will be more sensitive to Brexit than others, Ireland should realize the opportunity of being a window for UK businesses to the EU.
So What Should I do next?
If you are an Irish business owner, there a number of resources out there to help you prepare for Brexit:
Department of Foreign Affairs: Getting Ireland Brexit Ready (links to the full text of the Irish government’s Brexit contingency plan, and a five-part podcast covering what Irish companies are doing right now to prepare).
Office of the Revenue Commissioners’ guide to applying Non-EU customs requirements to your UK trade, in the event of a “No Deal” Brexit.
Revenue Commissioners (Information about trade facilitation after Brexit): Note that if you trade with Non-EU countries, you will need to get an Economic Operators Registration and Identification (EORI) number and also register for Authorized Economic Operator (AEO) status. Information on how to apply for both can be found here.
Enterprise Ireland has a series of checklists, advisory clinics and SME scorecards which are available to all Irish companies.
To assist with your planning, and for queries relating to the any of the above, book an appointment with Thomas Clare & Co. Accountants by calling 041-6851777, or emailing firstname.lastname@example.org