Many Irish businesses were caught in the fallout from Brexit almost as soon as UK voters chose to leave the world’s biggest trading bloc, in June 2016.
Sterling tumbled, making goods manufactured in the Republic but sold in Britain and Northern Ireland more expensive at a stroke.
Martin McVicar, chief executive of Monaghan-based forklift maker Combilift, which sells 25 per cent of the vehicles it assembles to the UK, recalls that the company hedged against this by buying as many components as it could from British suppliers, thus using cheaper sterling to cut costs, offsetting the impact of the more expensive euro on the price of the finished trucks.
Combilift changed that policy a year ago as a hard Brexit – that is the UK crashing out of the EU without a deal – seemed more likely.
“We are very purposely looking for suppliers outside the UK,” he says. “We are still dealing with UK suppliers that we have always dealt with, but now we are looking more on mainland Europe. The last thing we want to be doing is paying import duties.”
If we can develop more innovative products, we can charge more of a premium from our UK customers and we can still have a viable business there
A “no-deal” Brexit would leave Combilift’s customers paying 4.5 per cent tariffs on the forklifts they buy, while the company itself would pay the same on components that it imports from the UK. McVicar says that while the number does not seem high, it’s a “massive” difference for both his company and its customers.
Currency volatility and tariffs are just two of an array of challenges that Irish business potentially faces when a jurisdiction that is simultaneously a big customer and supplier leaves the EU in March.
Many are planning ahead as few can afford to wait to see if the UK crashes out or leaves under the terms of the deal that British prime minister Theresa May struck in Brussels, which will be put to a vote of the House of Commons on December 11th.
For Combilift, that includes finding new markets, not just beyond Ireland and Britain, but even beyond the EU. McVicar is just back from southeast Asia and travels to India next month. The company has always focused on selling abroad; it exports to 85 countries. “But we have intensified those efforts – even if there is a Brexit deal, it is still the right thing to do,” McVicar argues.
That does not mean that the forklift maker will desert the UK, which will remain an important market, albeit a tougher one that demands a new approach to competing for business. Another strand of Combilift’s strategy is to ensure it is selling something there that no one else has.
“Over the last 18 months we have really increased our investment in research and development,” McVicar explains. “If we can develop more innovative products, we can charge more of a premium from our UK customers and we can still have a viable business there.”
Chasing new customers and developing new products requires cash. The State-controlled Strategic Banking Corporation of Ireland (SBCI) and the European Investment Bank (EIB) are launching a new scheme for businesses investing to counteract Brexit’s impact through such measures.
They are aware of what’s going on, but a lot of them have done no planning on the ground
According to the EIB vice-president, Irishman Andrew McDowell, the scheme guarantees up to €300 million for small and medium-sized companies looking to borrow cash over eight to 10 years. The domestic banks, who must front 20 per cent of the guarantee, will loan the money. The SBCI will administer the scheme and take on a further 20 per cent of the guarantee, while the EIB will step in for the remaining 60 per cent.
McDowell estimates that this could see the release of up to €450 million in total for Brexit-related investment. The key stipulation is that the companies are actually borrowing the money for this purpose. He believes food processors and tourism-related businesses will loom large among applicants. “But all SMEs from across the economy will be eligible for this,” he says.
While new customers or new products will be potential solutions for some, new suppliers will be a problem for others. Brexit threatens parts of EU-wide supply lines that have for convenience tied Ireland to British distribution centres.
Ian Martin, chief executive of Dublin company Martin Services, which distributes first aid and hygiene products, says he has discovered it is not always possible to find a European provider. “You cannot switch on a supply line in France to supply the Irish market – that’s a three-to-five-year plan from a manufacturing point of view,” he explains.