Thursday 8 December 2016

No breaks for the Border as SME owners are the first casualties of Brexit

Published 27/10/2016 | 02:30

Anti-Brexit campaigners, Borders Against Brexit, set up a mock customs search during a protest against Britain’s vote to leave the European Union, at the border town of Carrickcarnon earlier this month. Photo: Reuters
Anti-Brexit campaigners, Borders Against Brexit, set up a mock customs search during a protest against Britain’s vote to leave the European Union, at the border town of Carrickcarnon earlier this month. Photo: Reuters

Derry-based Nuprint Technologies is located just under 5km from the Border with Co Donegal.

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The design and print SME does about 40pc of its business cross-border and sources the bulk of its raw materials from within Europe.

For Gavin Killeen, the company's managing director, the dramatic weakening in sterling over the last year is part and parcel of running a business in a border region.

"It effects me in that the vast majority of my raw material is manufactured in Europe somewhere," he says..

"So whether I buy that in sterling or buy that in euro, that price has gone up, and it's gone up by about 10pc or 15pc in the last three months, which is a significant impact in that raw materials makes up a huge percentage of our business."

Nuprint provides packaging labels for the food and drink industry in Northern Ireland and the Republic, having initially been a supplier of printed fabric labels for the clothing industry.

The business initially gained approval from prominent companies like C&C and Diageo, supplying labels for big name brands like Guinness, Magners, Harp and Molson Coors.

And then Killeen and his team penetrated the market in the Republic, to ensure they were protected against the often volatile changes in the value of the currency.

So, while he's taken a hit on the cost of importing raw materials, he's had some reprieve via his sales into the Republic.

"That's an engineered place that we've tried to get to, so that the business doesn't get exposed to fluctuations in currency like that. We forward buy, we hold and we'll watch what the markets are doing. Living in a border region, we just have to do that," Killeen says.

It's a similar picture for the city's shops.

Currency movements are a significant headache, or windfall, for the local retailers.

"A lot of the retailers here rely on the Christmas trade, and this year, because the euro was €1.44 to the pound, many of the Donegal shoppers didn't come into the city, and, by February, three of the longest established retailers in the city closed their doors," Killeen, who is also the current Chamber President, says. "Between the three of them, they traded in the city for 270 years. So the city has had to live with the impact of currency.

"Every single trader in the city will have two tills - one with euro and one with sterling."

While the Brexit vote marks the latest bump in the currency road for border firms, the vote itself has potentially far reaching consequences that extend beyond the movements in sterling and euro.

Both the Irish and British governments have stressed that they want to ensure the free movement of people remains between north and south, although it hasn't been made clear yet just yet how this will happen.

In Westminster yesterday, Labour leader Jeremy Corbyn pushed Prime Minister Theresa May into clarifying whether border checks would be introduced between the Republic and Northern Ireland.

Ms May simply replied that a "considerable amount of work" was taking place between the two governments on the issue.

And she repeated the now oft-used phrase that "none of us want to see a return to the borders of the past".

Foreign Affairs Minister Charlie Flanagan has been at pains to make clear the Government here is acutely aware of the Border issue, and the concerns of Border communities.

He was in Derry last week, visiting local manufacturing firm A&E Global and addressing the city's Chamber of Commerce. He was in Newry and Armagh yesterday meeting businesses and community groups.

Driving from Bridgend in Co Donegal to Derry, but for the change in speed limit signs from kilometres to miles, you'd barely notice you've crossed a border at all.

"The city of Derry is surrounded on three sides by the Republic of Ireland," Killeen says. "No further than two miles from the centre of the city, you're in Donegal. Derry's natural hinterland, 40pc of it is in Donegal.

"While the Border has been there, over the last 20 years, since the ceasefire, the city has now spread out into parts of Donegal. As the city has grown, people have moved out to live in Donegal and they commute into Derry and back and forth."

Drive into any of the car parks of businesses in the city, Killeen says, and you'll see just how prevalent the cross-border movements are.

"The cars are completely mixed, and the owners of those cars come from both sides of the Border. The people who are employed in the North, who live in the Republic, have had a 20pc cut in their wages since this happened. That's a serious impact on some of those families. The people coming the other way have had a 20pc increase."

Killeen believes the free movement issue will be resolved. But it's the potential for tariffs and customs controls that concerns him.

He believes the need to avoid smuggling could mean smaller border roads will be shut off, just like they were during the Troubles.

And that could impact on local firms.

"Some of my staff live in the Republic of Ireland. They travel across that border and we hope that their route to work wouldn't be impeded in any way," he says.

"I'm sure there's a way around with dealing with the movement of people, but if goods and services are moving across from one region to another, there would have to be some form of tariffs and customs duty.

"In order to stop those goods going down side roads and back roads, to stop black market, I would imagine that back roads and side roads would potentially have to be closed off the way they were when we had a security border."

Tariffs, he says, could significantly impact businesses in the area, particularly the agri-food sector.

"We could revert back to the World Trade Organisation tariffs, which are in general running at 6, 7pc on average, but for agri-food based products, they are considerably higher - 40pc for some dairy products."

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