6th July 2018
Further insights for policymakers and companies to support an informed response to Brexit challenges
The Department of Business, Enterprise and Innovation is jointly hosting a seminar, Building Stronger Business – Responding to Brexit, with the ESRI and Enterprise Ireland Friday 6 July 2018 to present the findings of a series of reports on potential impacts of Brexit on issues which include UK Imports used by Irish-based firms, the skills requirements arising from potential impacts of Brexit, firm-level impacts of Brexit and details of Irish-UK trade in services.
Welcoming the research work, the Minister for Business, Enterprise and Innovation Heather Humphreys TD, said “The research presented today provides a further contribution to the evidence base on the potential impact of Brexit for businesses and the broader economy, and will help inform our ongoing development of mitigation actions. The Government is committed to ensuring the continued growth and resilience of Irish enterprise after Brexit by helping firms to remain competitive. We also remain committed to securing the best possible outcome for Ireland in Brexit negotiations, working as part of the EU27, and in full support of Chief Negotiator, Michel Barnier.”
The key findings of the reports are as follows:
Intermediate Goods Inputs and the UK Content of Irish Goods Exports
This report, by ESRI, examined the structure of Irish imports from the UK at firm and product level and identified the level of reliance on UK imports and the relationship between these imported inputs and exports. A key finding of the report was that Irish-owned firms, while having a lower reliance on imported inputs than foreign-owned firms, had a greater overall reliance on the UK as their source of imports, with over 20% of their imports either completely/very highly reliant on the UK. The report found that the exports sales and diversification performance of firms is positively affected by increased import activity and scope – 10% more imports are associated with 4.6% higher exports. Disruptions to trade through restrictions in import flows from the UK arising from a hard Brexit would therefore have a more negative impact on Irish firms and potentially on firms’ export activities. The average import tariff exposure on products from the UK would be 2% in a hard Brexit scenario and as high as 18% for food products. Non-tariff barriers pose a further cost of doing business with the UK post Brexit and could be highest in the same sectors as are exposed to the highest tariff rates.
Irish-UK Services Trade
This paper, by ESRI, examined the determinants of international trade in services between countries and an estimate of the contribution to services trade flows associated with EU membership. A strong impact arising from EU membership was identified for trade in financial and business services, particularly in direct insurance. Irish services trade is concentrated in areas where membership has had a positive impact.
Other major determinants of services trade that were identified, common language, distance and income levels, suggested that the UK would remain an important trading partner for Irish services even outside the EU – the extent of trade restrictions would be a critical factor in this trade flow. Removing the EU effect on Irish-UK trade in services shows trade flow reductions of 33% for Irish services imports from the UK and a 45% reduction in exports. Insurance, financial services and telecommunications are the key sub-sectors driving the overall estimates of the effects of removing EU membership, accounting for 50% of the total trade reduction. The size of this negative impact could be reduced considerably depending on the level of reciprocal market access agreed in a final trade deal. The effects on total Irish services trade could also be mitigated by diversifying trade to other markets.
Addressing the Skills Needs Arising from the Potential Trade Implications of Brexit
This study, by the Expert Group on Future Skills Needs, focused on those skillsets associated with the diversification of Irish trade (e.g. international management, sales, marketing, design and development, foreign languages and cultural awareness), and those relevant to the movement or facilitation of goods trade across international borders (customs clearance, logistics, supply chain management). The study found that Brexit will have a significant impact on skills needed across international trading and Logistics/Supply Chain activities, which will be exacerbated by the underlying skills gaps in the context of falling unemployment. Clear skills gaps were identified in areas such as customs expertise and financial management.
The key messages from the research are that there is a lack of preparedness and understanding within enterprises of the impact Brexit may have. This is impacting on the readiness of firms to invest in the necessary reskilling or upskilling. It identified the need to support international traders and logistics /supply chain operators, particularly SMEs, in exploring new markets. Areas such as language capability, intercultural awareness and product design and development will be important.
Firm-Level Impacts of Brexit on Most Exposed Sectors
This report provides the outputs of a detailed engagement with 169 firms based in Ireland, operating in the sectors most exposed to Brexit. Utilising both qualitative and quantitative analysis, it identifies the greatest levels of concern for sectors related to the free movement of goods and possible imposition of tariffs on trade, with strong concern also expressed on mutual recognition of standards and the free movement of people. The study highlights that a ‘no deal’ outcome of the negotiations would have serious implications across many aspects of the business.
The research also indicates that firm-level responses are likely to be the most effective means of preparing businesses for Brexit.
Commenting on the research Jonathan McMillan, Head of Enterprise Ireland’s Brexit Unit said, “Today’s research provides further valuable information on the issues facing Irish companies, in the context of potential trade barriers with the UK and the challenges that arise in remaining competitive and growing their businesses post Brexit.
He continued, “Enterprise Ireland is currently working with companies who are Brexit exposed to strengthen their capabilities in key business areas including; strategic sourcing, customs & logistics, and financial and currency management. It is critically important that enterprises take steps to identify their individual level of exposure to the UK in terms of their import sources, thereby making informed decisions about actions they can take to mitigate the risks posed by Brexit.”
Ends
The Department of Business, Enterprise and Innovation (DBEI) plays a key role in implementing the Government’s policies of stimulating the productive capacity of the economy and creating an environment which supports job creation and maintenance. The Department also has a remit to promote fair competition in the marketplace, protect consumers and safeguard workers.
If you would like more information about this topic, please call DBEI Press Office at (01) 6312200, or email press.office@dbei.gov.ie.
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