Since 2016, there are few things that have dominated Irish business concerns more than Brexit. With the UK a key market for small and medium enterprises, the prospect of it crashing out without a deal to help smooth the way could have a significant impact.
Enterprise Ireland (EI) has been dealing with Brexit worries since June 2016, when it became clear that the United Kingdom would be leaving the European Union.
“This is our third year of working on the Brexit agenda, which is really quite astonishing when you think back on it,” says Enterprise Ireland’s Brexit unit manager Jonathan McMillan. “There is a perception out there that they are worried about what might happen. I think the one piece that came back strongly in our International Markets Week survey this year was how many of our companies – 53 per cent of them – have actually said Brexit has already had a significant impact on their business to date. It’s already hit them.”
Top of the agenda for companies attending Enterprise Ireland’s International Markets Week event has been the weakening of sterling and the fluctuations in currency. “The reason that sterling is a problem is because everything around Brexit is an extra cost, a potential cost to our businesses, whether they are having to bring in extra customs simplifications or procedures, or having to re-look at their supply chain – it’s all an extra cost,” says McMillan.
That was reflected in a recent survey conducted by the organisation, which found that about 10 per cent of client companies said Brexit had cost them €100,000 to date, with 5 per cent saying their bill was more than €250,000. That includes the cost of employing consultants to help with the process, or additional warehousing costs because they needed to hold extra stock in advance of the Brexit deadlines.
Opportunities
However, while the extra costs have been a burden for businesses, there are opportunities brought by Brexit. The extra costs, for example, have forced some companies to take a hard look at their business and see where it could be strengthened, from new markets to new suppliers that could offer a better deal. Julie Sinnamon, chief executive of Enterprise Ireland, noted that some businesses have brought operations back in-house.
Diversification and innovation have been high on the agenda, and Enterprise Ireland has played a significant role in smoothing the path for its client companies.
“When we talked to companies this time last year they said the number one constraint to developing new export markets was the cost. So we introduced our market discovery fund, and that was to help with the research costs from going into new markets,” explains Sinnamon. “Last year we supported 575 companies in total and we spent €74 million across programmes for the Brexit-exposed companies, from consultancy grants into those companies to market research grant to operational excellence grant. We have a planning phase, innovation, competitiveness and diversification.”
What we've done is grown the rest of the world at a faster rate. There's still a really strong level of interest in the UK
Enterprise Ireland’s strategy to encourage more companies to enter the euro zone has also begun to pay off, with 7.8 per cent growth in 2018. “That is higher growth than we’ve seen in that area, and it’s because we had a real drive in identifying companies to go into the market for the first time. Last year, we had 74 clients open a new presence in the euro zone; in the first six months of this year it’s 57. We’re seeing a higher level of interest in trade missions, a higher level of interest when we are bringing buyers into Ireland from the euro zone and a higher level of investment in the market.”
‘Accelerating’
Three euro zone markets – Germany, France and the Netherlands – have now reached over €1 billion in exports, providing significant opportunities for companies. “It is for a lot of companies accelerating what they should have been doing anyway,” says Sinnamon. “Ten years ago, 43 per cent of our exports were into the UK. The figures in 2018, 33 per cent are now into the UK from Enterprise Ireland client companies.”
That doesn’t mean the value of the UK is diminishing; over that time, exports into the UK have also increased, rising by 50 per cent. “What we’ve done is grown the rest of the world at a faster rate,” Sinnamon says. “ There’s still a really strong level of interest in the UK.”
But the euro zone is not the only target for expansion. EI’s client companies have also indicated an interest in Asia Pacific and the US, and, in response, EI is adding seven new overseas offices to support that, including one in Seattle in the US and one in Vietnam, and bringing additional staff into China, reflecting the new priorities of Irish businesses.
Revive and survive: How a food firm avoided sour taste of Brexit
For Revive Active, the Brexit vote could have had devastating implications for the fledgling business. The food supplement maker was using contract manufacturers in Wales, meaning a hard Brexit would have made it difficult to continue doing business. And, at only five years old when the Brexit vote passed in 2016, the business was relatively young.
We always wanted to come come home and set up a manufacturing unit. This accelerated the plan
Managing director Daithí O’Connor describes it as “facing down the barrel of a gun”. So the company made a strategic decision, and set up its own manufacturing facility in Ireland. It meant an investment of close to €700,000 – a big commitment for such a young company, but there was little choice in the matter. Quite simply, he says, the company couldn’t afford not to.
“We always wanted to come come home and set up a manufacturing unit,” he said. “This accelerated the plan.”
There were things to organise: getting the funding in place, identifying a suitable premises, converting the building to a state-of-the-art facility. The Mullingar operation now employs 12 additional people, and the reaction from its suppliers and customers has been positive. The plant is now in full production, and the Wales contract manufacturing is the still the contingency plan, so if Brexit is a little harder than Irish businesses would like, the company is protected from at least some of the fallout.
“It was a big investment from our point of view,” he says. “But it protected the company, it meant we had total control over the quality of products, and we were investing back into Ireland.”
