Warning pound weakness will 'wipe out' SMEs
British Irish Chamber calls for Brexit action as slump causes severe pain, writes Samantha McCaughren
The weakness in sterling has the potential to "wipe out" a number of Irish SMEs, the British Irish Chamber of Commerce has warned.
John McGrane, director general of the chamber, said that many businesses are already in "severe pain" due to the currency changes.
"We are already having discussions with lots of them which are really struggling at 93p and are very worried about the future," he said.
The chamber is about to publish its policy paper on supporting SMEs through Brexit and called on the Government for immediate action.
"It is the top issue for SMEs," he said. "Brexit existentially threatens lots of SMEs. But it is already happening for many companies."
Among the recommendations is the development of a marketing grant for Irish SMEs which are exposed to the UK similar to Bord Bia's Marketing Intensification Programme, aimed at the food industry.
"That showed we know how to do this, the issue now is to widen it as far as possible to the greatest number of affected people," said McGrane. "While food is very exposed, it is far from the only sector that is damaged."
Another sector which is already being hit is the call centre business. "Lots and lots of British businesses are serviced by call centres in Ireland," he said. "If you take some of the catalogue fashion companies, for example, a lot of those have their customer care centres in Ireland.
"That means Irish businesses in Irish towns are being paid in sterling. Their cost base is in Ireland and the value of their sales is down 20pc since the referendum. And they have no possible way of reducing their cost base by 20pc.
"A number of those companies are already in severe pain," he added,
The policy papers highlights how uncertainty is stalling expansion plans and references an example of an Irish company which wanted to expand their operations into the UK market.
"They had looked at premises and joined the British Irish Chamber of Commerce but are now holding off on investing in the UK market until further clarity over Brexit emerged," states the paper.
"Uncertainty remains prevalent among SMEs and within the wider economy in both the UK and Ireland."
The paper's recommendations include the introduction of a 'Customs Voucher Scheme' for all small and medium-sized enterprises dealing with customs for the first time. It backs a reduction in VAT and an expansion of the entrepreneur relief in keeping with the UK's more generous scheme.
It also suggests a reduction in employers' PRSI. "It was done before temporarily. This country has a very good track record of showing that when you reduce a tax rate it can increase tax revenue," said McGrane.
The paper also calls on the Government to increase capital expenditure to 4pc of GDP.
"Anything that improves the competitiveness right now is a good thing," said McGrane.
Sunday Indo Business