Saturday 20 July 2019

Brexit on our minds: Ireland hopes for best but prepares for the worst

From the booming docklands of Dublin to the food plants that dot rural Ireland, there's nothing on anyone's mind but Brexit, writes Fearghal O'Connor

Tension is rising as the stand-off between Brussels and London continues
Tension is rising as the stand-off between Brussels and London continues

The first shipment of stuffing from Mr Crumb's state-of-the-art breadcrumb plant in Finea, Co Westmeath to Portland, Oregon was supposed to arrive in time for Thanksgiving. But the logistics of crossing through unfamiliar borders is an unpredictable business. The five weeks Mr Crumb was promised it would take for the shipment to arrive by ship turned into eight weeks - thus missing a chance to be on the shelves ahead of America's favourite day to eat turkey.

The shipment - a valiant and hopefully ultimately successful attempt at the type of market diversification that Irish companies are being advised to pursue in the face of Brexit - is the sort of plan under discussion in boardrooms around the country.

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For Ireland, Brexit has already forced often unwanted change. In recent days the Sunday Independent has spoken to forecourt owners with plans to fill petrol tanks to the brim ahead of Brexit day at the end of March, pharma experts helping to reroute drugs away from the UK and port administrators spending millions on inspection posts they thought were a thing of the distant past.

So, for Mr Crumb owner Bernard Coyle, selling stuffing to the Americans was a difficult but necessary move. The product has only limited appeal in continental Europe so he and his sales director - his son Jason - set about the tough and expensive job of winning listings with American retailers.

"It's definitely not simple but we have to replace what we are losing in the UK," he says. Mr Crumb's problems have been further complicated because it locked into forward sales at the initial 20pc sterling crash after the referendum only to watch the currency later recover strongly.

So when its first US shipment went awry, Coyle decided to take a financial hit and fly out four pallets of the product to get on to the shelves in time for Thanksgiving. When the pallets landed they were held for inspection by the FDA (Food and Drug Administration) - for three long weeks.

Business Minister Heather Humphreys
Business Minister Heather Humphreys

"We missed Thanksgiving and got the product into the shops literally days before Christmas," says Coyle.

A tale of two Brexits

Mr Crumb is based in a state-of-the-art plant in the village of Finea, which straddles the Westmeath/Cavan border, surrounded by beautiful but desolate bogland. The food processor is one of the very few sources of employment for miles around. For Coyle, keeping Mr Crumb afloat is as much a vocation as a job.

"Otherwise I'd have packed it in already. It's a tough business to be in. Food is a very tight margin business and it is almost ruled out of existence by the powers that be. For example, most companies haven't had a price increase in a decade but at the same time the Government has implemented four minimum wage rises in that time. Agri-food businesses around rural Ireland are already struggling as this Brexit cliff-edge approaches."

But Brexit, of course, is a matter of perspective. A hundred kilometres down the M3 in Dublin's booming docklands the mood is different. Brexit is still a very real and present danger but for the city it is an opportunity too and an influx of financial services staff from the UK is already bringing its own challenges, says Lucinda Creighton.

"Around southside Dublin the schools situation is pretty challenging. There is a new international school opening which is great but it is only part of the solution," she says. The former Minister for European Affairs - now working as a lobbyist for multinational clients between Dublin, London and Brussels - agrees that when contrasted with the type of dark forebodings that are coming from rural areas, Brexit, like much else, is a tale of two Irelands.

"The big problem at the moment for multinationals is the lack of housing in urban Ireland. It's reaching crisis point. It's a big concern that my clients talk about all the time. We have to be able to attract skilled staff. They have to have somewhere to live and they have to have somewhere to send their kids to school."

Attracting just 4,500 Brexit jobs to the country's financial services sector is an underachievement, she believes, but she expects that number to "double, triple, quadruple over the coming years".

Former Minister, turned lobbyist, Lucinda Creighton
Former Minister, turned lobbyist, Lucinda Creighton

"Ireland has a real opportunity to become a genuine financial services hub," she says. "Already it's full employment. You can name your price if you are working in financial services."

Walking the plank

Over on Kildare Street at the Department of Business, Enterprise and Innovation, Creighton's former Fine Gael colleague Minister Heather Humphreys rarely escapes talk of Brexit.

"I never have a meeting at which Brexit is not discussed," she says. As a native of Co Monaghan, the Border was always a feature of her life.

"It splits families and it cuts you off. I remember going to play table tennis years ago across the Border. Instead of doing a round trip of maybe 20 miles in the car we stopped at a certain field and walked across a plank over a drain and into the North and into the hall where we needed to be. The road was blown up and you couldn't get across it and we don't want to go back to that."

Now workers from Armagh routinely arrive into Monaghan companies like Computershare, Combilift and Errigal Contracts, she says.

"We've a whole generation now that doesn't know anything about a border and we want to keep them that way."

But Brexit is a big blow for business right around the country, she admits. Her department has implemented a range of loan and training schemes to help but the test of these will only come if the political situation worsens to such a degree that it starts to create disruptive chaos.

"It was not something we planned for, it was not part of our policy and it is not something we ever wanted but it was a decision of people in the UK and we have to deal with it. It's a huge worry for business people but, to be quite honest, a lot of the things that we are telling companies to do to prepare for Brexit are actually things they should be doing anyway. It's about innovation, market diversification, competitiveness, looking at management processes and reducing costs."

But, she says, her real concern is for the businesses who have not yet engaged: "The ones who are thinking this isn't going to happen or that it's going to go away. I don't believe there is going to be a crash-out but there is nothing good about Brexit in terms of our economy and our exports so we have to get ready and prepare to identify and mitigate the risks."

Pat Sutton, of Kildare accountancy practice O'Kelly Sutton, has a wide variety of SME clients across Leinster. He is witnessing first-hand the different levels of engagement with Brexit by Irish businesses.

"Some of them are simply burying their heads in the sand hoping it will go away. But on the other hand we have a lot of clients who are going through cost-reduction programmes in anticipation of what is coming down the tracks. Some of them have been cutting headcount because they are looking down the tracks at what is happening in the UK knowing that doing business there is definitely going to cost them, be it through tariffs, custom duties or regulatory standards."

Green shoots of Brexit

An unintended upshot of that cost-cutting for some of his clients is that over the last six months "they are making more money than they have ever made," says Sutton.

There have been other positive spinoffs too: "We've also had clients who have been approached by multinationals to become their agent in Ireland after Brexit. Previously the multinationals would have done business here out of their British offices."

When it comes to Brexit, Michael Hoey - the owner of Country Crest and Ballymaguire Foods - has a healthy mix of optimism and caution that perhaps comes naturally to anyone who has spent a lifetime depending on the Irish climate for his living.

Over the past 25 years he and his brother Gabriel have built up a substantial fresh produce and chilled ready meals business in Lusk, Co Dublin with major supply contracts with many of the biggest retailers in the country.

"I'll never forget the Y2K scare over the computers and everyone had consultants in and then nothing happened," says Hoey when asked about his concerns around Brexit. "Hopefully that will be the case again this time."

Nevertheless, people in the food industry are genuinely scared about what is coming over the coming weeks and there are challenges ahead, he says. "But I do think there is a lot of scaremongering going on out there. People have to be cautious but there are opportunities in this for the food industry too. It's up to us as food providers to look after our customers here in Ireland and they are going to have gaps that they will need filled and so there will be opportunities for more orders."

Hoey says his company is already seeing this in its meal business. Nevertheless, despite his optimism, Country Crest has worked hard to mitigate the risks of Brexit. Earlier in the day, the company had been in touch with its insurance company to ensure that it has the green cards its delivery drivers may need to drive in the North and in Britain, for example. And it has already looked at registering trading numbers with Revenue to satisfy potential WTO import and export to and from the UK are properly taken care of already where possible.

"We also have quite an amount of product in storage because we don't know what the first six weeks is going to look like."

Hoey and his team have travelled Europe to put in place a range of alternative suppliers for key ingredients and products that it currently sources from UK companies should the UK crash out of the EU at the end of next month.

"It's making us have to go further afield to secure our sources," he says. "Hopefully it never comes to that and we have a lot of loyal suppliers in the UK who bend over backwards for us and I don't want to see them isolated. But listen, of course we're worried and if we get hit by this we just have to address it."

A bitter pill?

It is not just the agri food industry that fears a chaotic cliff-edge Brexit. The supply of medicines is also something that the pharmaceutical sector and state bodies here are working hard to guarantee. Coincidentally, the EU's Falsified Medicines Directive comes into force this weekend, just ahead of the crunch few weeks in the Brexit process. Irish pharmacies are said to be well-prepared for the new system - which requires them to scan prescription medicine packs at the point of sale to ensure they are checked against an EU-wide database into which manufacturers will have previously uploaded an individual code for every single packet. But in the UK, the situation is much more fluid, with some local health boards advising pharmacists not to invest in the new scanning equipment until it becomes clear whether the country is to continue operating the new system post-Brexit.

This matters hugely for Irish pharmacists and pharmaceutical suppliers because 70pc of the prescription medicines they sell here are either manufactured in, or distributed from, Britain. When Brexit happens will the barcodes on those medicines all continue to be uploaded into the EU database that will allow them to be sold here in Ireland?

Darragh O'Loughlin of the Pharmacy Union of Ireland is adamant that there will be no problem: "It's a strange situation for the UK on this but they are implementing the directive. Yes, if there is a hard Brexit, they then won't have access to the system but this won't matter because Irish pharmacies will still be able to access the unique serial numbers on any medicines that are placed on the Irish market."

But John Cahill of international consultancy Pharmalex says he is not as confident: "On March 29th Irish pharmacists will not be certain that all of the distribution companies they use have gone through their supply chains with a fine tooth comb to see where it touches the UK. They have to have done this rigorously. The bigger companies will no doubt have planned around this but it is the small and medium businesses supplying through the UK that could come unstuck from a regulatory perspective. For example, you could find problems with a cheap generic medicine and patients here could have to go back to the more expensive branded version."

Lucinda Creighton says her clients in the pharmaceutical sector are also very concerned about the FMD process in the event of a hard Brexit.

"That is high on the risk register of the pharma companies and nobody can give a cast-iron guarantee," she says. "My expectation is that there will be two-way agreements in certain sectors to keep the show on the road and allow the UK to be effectively recognised as an EU member state for some of these purposes. But no matter how much goodwill exists on both sides to do this no one can give a cast-iron guarantee that it will happen."

Brexit plans triggered

Many of Creighton's pharmaceutical and life sciences clients have already triggered their no-deal Brexit plans this month "implementing the stockpiling of drugs and ingredients and the relabelling of product," she says.

Whether those plans are robust enough will be tested in the days and weeks after March 29th.

Others too have spent time worrying about systemic risk with big implications. Dublin Port chief executive Eamonn O'Reilly knows that if things go wrong at the port the whole economy will suffer because the vast bulk of the country's imports and exports pass through it.

"We are only part of a bigger machine that has to work well but we will have the infrastructure in place," says O'Reilly. His team have been planning for a hard Brexit for over a year.

"In December 2017 the British said they would be leaving the customs union and the Single Market so we set out in Dublin Port to prepare for Brexit on the very simple basis that Brexit meant Brexit," he says.

Port in a storm?

By the end of March, Dublin Port Company will have spent €30m in putting in new inspection posts and purchasing large amounts of warehousing capacity within the port to be made available for State agencies such as Revenue and the Department of Agriculture.

"The timing was awful. We need to spend over a billion euro on our investment plan for the next 10 years but spending this €30m this year was not in our plan but we've had to adapt and adjust to Brexit."

O'Reilly is confident that the physical infrastructure plans will work but warns that this is just part of the issue. He has no control over the staffing and resources of the new inspection facilities and this, he says, is going to take time to build up if a hard Brexit is triggered on 29th March because Ireland "quite reasonably" has been preparing for a transition period to December 2020.

"It is unreasonable so for anyone to think the full resources can be ready and in place by the end of March," he says.

None of those preparations at Dublin Port, of course, will do anything to avoid problems at the other side of the Irish Sea: "As best as we can tell there has been zero preparation at British Ports. However worried we are about our preparations in Ireland, we are streets ahead of where they are in Britain. But I'm not fearful about Holyhead because they will have no option to just let the goods flow through until they get up to speed and that's pretty much what HMRC (Her Majesty's Revenue & Customs) told us when we met them last year," he says.

Trouble in the ports on either side of the Irish Sea would hit any number of vital sectors in any number of ways. Circle K Ireland managing director Niall Anderton says that on March 28th every Circle K forecourt in the country will fill its tanks to the brim "just in case".

The company is the biggest fuel importer into the country, also supplying some competitors.

"The jetties in Dublin Port are dedicated fuel terminals and shouldn't get blocked and there is contingency for storage in other locations. But congestion elsewhere in the port if the EU requires every vehicle coming off a ship to be checked would be a challenge."

The company on average has 100 fuel trucks a day - including for aviation fuel - passing through the port and it has met Dublin Port and the Garda Traffic Corps to discuss how they could get safe passage should traffic start backing up into the Port Tunnel.

But Anderton's bigger, more long-term concern is that the economy starts to falter and that this will hit the positive impacts on consumers of economic growth that he witnesses on his forecourts every day: new car, more trips, fancy coffees and an ever-increasing appetite for non-discretionary spending.

"We've had a good time of it for the last number of years and our big concern is that the economy starts to falter. If that happens we would eventually have to look at our business model if the business started to get tighter," he says.

Indeed, if that does start to happen, everyone from stuffing manufacturers, to port bosses, to ministers in Dail Eireann will be looking very, very closely at their own figures and budgets too.

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