Ibec, the group that represents Irish business, today called on Government to introduce a comprehensive package of new measures to head off the worst consequences of Brexit and increased global uncertainty. A new Ibec report sets out a series of urgent measures to protect Irish businesses against the precipitous decline in sterling and shore up Ireland's competitive position as a place to live, work and invest. Proposals include a new enterprise stabilisation fund, additional funding for market diversification measures, an access to finance package, trade finance measures and an expansion of online trading supports.
Ibec Director of Policy Fergal O’Brien said: "Brexit and the possibility of a more protectionist US pose very significant risks to Ireland. The budget introduced some useful measures in response to Brexit, but did not go nearly far enough. Companies are moving quickly to manage severe competitive pressures, but an urgent, targeted national response is required.
"The exporting industries most affected by the sterling fall are typically job intensive and deeply embedded in local economies. A review of the historical exchange rate and agri-food export relationship shows that a 1% weakness in sterling results in a 0.7% drop in Irish exports to the UK. This has already begun. Our most recent trade figures for the year to August showed the value of Irish food exports to the UK fell by 8.1% annually. This fall accelerated to 14.5% annually in the two months since the referendum and has hit all categories.
"Retailers are increasingly concerned at the prospect of significant cross-border shopping over the coming pre-Christmas period, with new figures also showing a surge in online shopping in the months following the UK vote. Central Bank statistics show that e-commerce transactions recorded on Irish debit and credit cards jumped by 20% from €1 billion to €1.2 billion between July and September as sterling dropped. This was way above trend and is likely to have mostly gone to UK retailers.
"While sterling strengthened somewhat last week, we expect further volatility ahead as markets react to the political twists and turns of Brexit negotiations. The Irish Government can't sit on its hands during these negotiations, while sustainable businesses fall prey to the already evident economic realities of Brexit. A comprehensive immediate response package is now needed to save jobs."
Key proposals set out in the report include:
- Much greater effort is needed to help viable companies come through the Brexit transition, retain UK market share and diversify. Ireland must make a strong case to the EU to provide a state aid framework which recognises our particular Brexit risks.
- An intense focus on cost competitiveness is required. As sterling drops and competitive pressures increase we need to be vigilant against excessive increases in labour costs, and take strategic decisions to improve cost competitiveness in areas such as energy, regulatory and insurance costs.
- Potential trade restrictions post Brexit and the more preferable tax treatment of SMEs in the UK, raise the possibility of Irish SMEs servicing that market from within the UK itself rather than by exporting from Ireland. As such, the need to level the playing field in relation to the tax offering for indigenous business has never been more urgent. While changes in the budget were welcome, they did not go far enough.
- As we look to the medium term and some of the opportunities which may come our way, we need to ramp up public investment far beyond current plans; and put in place the quality education system, public transport network, housing, and public services needed to attract new investment and compete in a post-Brexit world.
- The risks from Brexit will weigh heavily on the regions. If we do not wish inequality of economic activity to expand post-Brexit we will need to address infrastructure deficits in the regions. Key projects now need to be expedited.