Friday 19 July 2019

Richard Curran: 'Too many firms have switched off to reality of a hard Brexit'

Concern: Tanaiste, Simon Coveney, centre, with Pascal Donohoe, Minister for Finance and Helen McEntee TD, Minister for European Affairs speaking to journalists at government buildings. Photo: INM
Concern: Tanaiste, Simon Coveney, centre, with Pascal Donohoe, Minister for Finance and Helen McEntee TD, Minister for European Affairs speaking to journalists at government buildings. Photo: INM
Richard Curran

Richard Curran

There was more than a little hint of concern from Tánaiste Simon Coveney about the ramifications of a no-deal Brexit, when he announced further details of government contingency measures on Tuesday.

The concern wasn't just about the impact no-deal might have on the economy. He also appealed to exporters and entrepreneurs not to ease off on their Brexit preparations. "At the end of March, there was an extension of six months and some people on the back of that who had focused so intensively on Brexit took the foot off the accelerator," he said.

"That needs to end now. We need to get the country collectively ready for all potential Brexit outcomes."

Evidence suggests that while many Irish exporters had put full contingency plans in place by the original March 31 deadline, other firms had not. And if anything, the extension until October 31 has prompted some businesses to virtually ignore the issue of Brexit.

Small businesses in particular were slower to embrace preparations for a hard Brexit and what it might mean for them.

There is a deeper problem now, which is reflected in the Tánaiste's comments. Many Irish entrepreneurs no longer believe Brexit will happen.

Conversations with owner/managers about Brexit these days follow a pretty clear pattern.

Firstly, they will give out about the appalling state of political discourse in the UK. Then they will talk about what a grave danger a hard Brexit would pose for the Irish economy, especially in border areas, and key sectors like food. Then comes the twist.

They each have their own theory about what is going to happen. These theories are very varied. Some involve Boris Johnson doing a complete U-turn on Brexit, or at least embracing some political realities once he arrives in No 10.

Others see a Johnson cul-de-sac, where he wants to leave without a deal but is stopped by the House of Commons and reverts to a general election instead.

All of these theories provide time and space for small businesses to wait and avoid implementing any changes that in the long run could be unnecessary. What business person wants to spend time and money on something that in the end they won't need to do?

Behind the scenes, when it comes to preparing for a hard Brexit, things are getting very complicated. A lack of engagement from small firms is a real problem because it could make a bad situation a lot worse. Talk to Local Enterprise Offices around the country and they will tell you they are organising lots of Brexit-ready events and few people are turning up. Anybody who trades with the UK has to register for an EORI number with the Revenue Commissioners to continue doing so after Brexit.

This can be done online and takes about three minutes. Yet there are around 40,000 businesses who haven't done it yet.

You must have an EORI number if you import any goods from the UK or sell to the UK after Brexit.

That, of course, includes Northern Ireland. And, even if Brexit ends up being relatively soft, with a close trade relationship between the UK and Ireland, and no tariffs, you will still need one of these numbers anyway. The only way you won't need one is if the UK decides to abandon Brexit altogether. Many small businesses have failed to realise that even if the final outcome involves a close trading relationship, there will still be increased paperwork and cost associated with compliance. A soft Brexit will still alter how we trade with the UK.

This is where firms have to decide either to train up somebody in their business on how to deal with greater customs compliance or hire specialists to do it for them.

Customs agents are quite thin on the ground. There used to be hundreds of them in places like Dundalk and Dublin Port. Firms currently trading outside the EU may well have hired the services of a customs agent or broker already.

But in a hard Brexit scenario, the demand for their services will skyrocket overnight.

Yet customs brokers themselves have been reluctant to beef up their staffing levels in case they aren't needed. It is understandable that they don't want to commit to hire dozens, if not hundreds, more staff, only to train them up and then let them go again.

This is a potential logistical nightmare for Irish trade in the event of a hard Brexit. And nobody has an easy solution. Other logistical preparations can be made, however. For example, firms might want to apply for a customs clearance, which means they do not have to pay various customs charges such as tariffs or VAT at the moment of entry of goods into Ireland. This requires getting a certificate which could take many weeks, if not months, to procure. Firms that want to be ready on October 31 would need to start working on these things now.

The best advice on being Brexit-ready is that exporters and importers need to talk to their suppliers and customers.

If, for example, you buy raw materials from a UK company, and that British firm actually imports them from somewhere else, what kind of tariffs might the Irish firm processing those raw materials have to pay? Could they be hit with double charges?

Irish importers are being told to identify the country of origin of all of the goods they buy from or through the UK. That means having a conversation with your supplier. But anecdotal evidence suggests many British firms are not engaging on these topics at all.

The Irish Government is pushing information roadshows and events through the State agencies to try to get more Irish businesses re-engaged with Brexit and how they should prepare.

But there is little sign of similar British government-backed events taking place with suppliers or customers across the water.

In the North, the inertia caused by the political stalemate is leaving many firms entirely in the dark about these matters.

A hard Brexit doesn't just threaten medium to large-sized manufacturers selling to the UK.

We now have lots of small online retail businesses. They typically import products from places like China or continental Europe through the UK. They may even source their products directly from the UK. They then sell them online to people in Ireland, and the UK. A hard Brexit will place these companies in an administrative and logistical nightmare that could undermine their entire business model.

Some of these firms transport their product north of the border to avail of cheaper postage rates up there. That won't be happening after a hard Brexit without paperwork and customs clearance issues. Accreditation and standards is a whole other potential minefield for Irish firms after Brexit. The list of genuine additional costs goes on.

Aside from the potential economic hit from a no-deal Brexit, the Government has a separate battle on its hands - getting Irish business to take it seriously and not try to do everything at the last minute.

Yet Brexit has confounded us all. It remains as unpredictable as ever. On the day the Government announced its latest contingency plans, Jeremy Corbyn announced a shift in British Labour Party policy on backing a second referendum. In a logical and sensible political landscape, this change would be interpreted as ratcheting down a little further the chances of a no-deal crash-out. But politics in Britain right now is neither logical nor sensible.

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