Monday 20 November 2017

‘We’re shocked... we don't have a contingency plan' Ryanair's Jacobs as chief executives react to Brexit

‘In the longer term it’s really bad for Europe.’ – Tony Smurfit, CEO, Smurfit Kappa ‘There are certain things you can control and certain things you can’t. This is one of those things you can’t.” – Pat McCann, CEO, Dalata ‘There’s been an unprecedented number of bookings from people in the UK today.’ – Kenny Jacobs, chief marketing officer, Ryanair

Patrick Coveney Picture: Gary O' Neill
Patrick Coveney Picture: Gary O' Neill
John Mulligan

John Mulligan

The leaders of some of Ireland’s biggest companies have expressed their shock over the UK’s decision to quit the European Union.

The Irish Independent spoke to chief executives this morning who’ve insisted that business will carry on as normal – at least for the time being.

“It’s a surprise,” said Patrick Coveney, the chief executive of Irish food giant Greencore, which is the world’s largest sandwich maker and supplies all the UK grocery chains with products. “But we’re doing the same thing this morning that we were yesterday.”

Greencore generates most of its £1.3bn (€1.6bn) annual turnover in the UK. But it also has a growing and important business in the United States, where clients include the likes of Starbucks.

“I don’t think people should be too surprised that markets are reacting the way they are,” he said. “It’s going to take a little bit of time for everyone to figure out what it means, and what the need for a business and economic response is.”

“We had a preference for Britain to stay in,” said Mr Coveney. “But we don’t have the same degree of exposure as many other businesses in the sense that we manufacture in the UK for sale in the UK. So, our costs and our revenue broadly match. I think the exposure we’ll have will principally be on what happens to the overall UK economy. We have to work through over time what it means.”

Read more: BREXIT: Sterling plunges to 31-year low, biggest ever fall, as UK votes

The Greencore boss said that the demographic trends the company has identified in the UK around food-to-go, for instance, are “completely un-impacted by this vote”.

“We’re significant investors with a very good business in the UK, and we’re significant and growing investors in America. We’ll continue to do both of those things. We just have to be calm and see what unfolds over the next few months and years,” he added.

With Sterling having slumped, tourism from the UK to Ireland is likely to take a hit.

But Pat McCann, the chief executive of Ireland’s largest hotel group, Dalata, said that the company – as with others – will just have to adapt to the UK being outside the EU.

“In business, there are certain things you can control and certain things you can’t. This is one of those things you can’t,” he said. “What you do is adapt. We’re going to run our business and will look at where we can take advantage of whatever happens and that’s the reality of life.”

Dalata generates most of its revenue in Ireland, but owns or operates nine hotels in the UK from Belfast to Derry, and London to Leeds.

“The key question is what effect is this going to have on the UK economy,” said Mr McCann, who added that opportunities could also emerge from the UK’s exit from the EU.

“This notion that the UK will be frozen out from a trade perspective isn’t going to happen.”

The chief executive of global packaging giant Smurfit Kappa, Tony Smurfit, said this morning that the result creates uncertainty. Smurfit Kappa generated revenue of €8.1bn last year and much of its cardboard packaging is used for food and drink.

“In the longer term it’s really bad for Europe,” he said. “In the shorter term, we’re going to see a shock and uncertainty in business. In the shorter term, obviously the exchange rate movement is going to alter trade flows and that has implications. People are still going to consume but a lack of confidence is not good for business.”

Read more: British Prime Minister Dave Cameron announces he is to resign after Brexit result

Smurfit Kappa has operations all over the world, and the UK is its fourth biggest market in Europe.

“It’s an important market for us. We’re close to the largest producer of our product in the UK. It’s a market in which we’ve invested strongly over the past number of years,” said Mr Smurfit. “For me, the biggest worry is in the longer term than in the short term. The uncertainty aspect of things we will have to take into account when we decide investment.”

Kenny Jacobs, the chief marketing officer of Ryanair, told the Irish Independent that the first real manifestation of the airline’s reaction to Brexit is likely to be reflected in its summer schedules in and out of the UK in summer 2017.

About one-third of Ryanair’s 116 million annual passengers fly in and out of the UK. Chief executive Michael O’Leary campaigned vigorously for a ‘Remain’ vote and previously warned that Ryanair’s future investment in the UK would be impacted if the UK leaves the EU.

“We’re surprised and disappointed,” said Mr Jacobs. “In the short-term it doesn’t mean anything., What we’re going to be looking at now is a couple of years where there’s a huge amount to be figured out. Germany will have to take a leadership role.”

“We don’t have a contingency plan. We don’t need to have one until we know what they’re going to do with the single market,” he added.

Mr Jacobs said that Ryanair had seen a more than 33pc rise in bookings this morning from the UK, compared to the Friday last week.

“There’s been an unprecedented number of bookings from people in the UK,” he said. He said that while that coincided with a seat sale, it also probably reflected people wanting to take breaks after weeks of “pent up anxiety.”

Mr Jacobs said there will now be a question mark over Ryanair’s future capacity plans in the UK due to the uncertainty.

“That can first be manifested in the summer 2017 schedule. If the uncertainty means we’re less comfortable about investing in growth here (in the UK), there are plenty of other places where we can add traffic.”

IAG, the airline group that owns Aer Lingus, British Airways, Iberia and Vueling, insisted this morning that Brexit will not have a long-term impact on its business. But it also said that profits this year will not now be as strong as expected.

Online Editors

Promoted Links

Business Newsletter

Read the leading stories from the world of Business.

Promoted Links

Also in Business