One year later
One year on and Brexit still features prominently in a period of unprecedented change. Or so it seems. Are things really that different or do we need to keep things in perspective? After all as Captain Boyle proclaimed “Th’ whole worl’s in a terrible state o chassis” all those years ago.
We need to be constantly reminded that Brexit hasn’t happened yet. It is a journey, one with many twists and turns. It is true to say that there were some impacts on Irish business in the immediate aftermath of the referendum, especially with the fall in the value of sterling. On the positive side as the process is ongoing, there remains an opportunity on both sides of the negotiating table to influence the type of outcome that could arise from the negotiations and more on that shortly.
It is incumbent on the business community in Ireland to identify solutions to the problems which Brexit will impose on Irish business and to seek out opportunities. Let us take stock of where we are on that journey, starting with where few businesses in Ireland want to start, the outcome of the referendum.
If we cast our minds back twelve months, many in the business communities in both Ireland and the UK were shocked by the outcome of the UK referendum. In particular, many indigenous Irish businesses that rely heavily on the UK market for exports were concerned about the potentially negative implications of Brexit.
The prospect of border controls between Ireland and Britain, in particular between ROI and Northern Ireland, the imposition of customs duties and tariffs and the increased costs to business were a cause of grave concern. Restrictions that could be be imposed on the free movement of people between the EU and the UK post Brexit was equally a matter of concern.
Many Irish businesses are unprepared for Brexit. In the initial aftermath of the UK referendum result, businesses were seeking to learn more of the potential implications. This quest for knowledge and indeed certainty was not helped by public pronouncements in the UK such as “Brexit means Brexit”, a phrase which was not very informative and served only to increase the uncertainty.
In the lead up to the triggering of Article 50 by the UK Government on 29 March 2017, it was identified that the UK Government provided some clarity in her speech which outlined the UK prioritised the control of immigration over membership of the single market or customs union. Clarity perhaps but not helpful to business in Ireland.
This left Irish business with an increasing dilemma, fully committed to membership of the EU but fearful that this could, in fact, mean that many sectors in the economy would be worse off with a knock on impact on the Irish economy as a whole.
This brings me to the recent UK general election and the potential for change in terms of the UK’s approach to Brexit. Even in the short period since the election, there has been an increasing sense that business will be consulted more and need to be more involved in order to better understand the implications. This is important because a good deal for business in the UK is a good deal for Irish business. It remains to be seen what impact this might have but the fact that communication is increasing has to be positive.
Turning specifically to the implications for Brexit and Ireland, I attended a conference on Brexit earlier in the year and there was widespread criticism that, at this crucial time, the Northern Ireland Assembly was not functioning and Northern Ireland was not being represented in the negotiations on Brexit. Following the outcome of the UK General Election, the DUP are now centre stage. In terms of Brexit, where the DUP are pro Brexit but recognise the importance of the island of Ireland economy and has no desire for hard border controls, this is a positive development, whatever about the wider implications which are outside the ambit of this article.
Allied to the evolving political situation, Irish business has overcome the initial shock and many companies have progressed their scenario planning to assess the implications of Brexit on their business and sector. This is a development which the Deloitte Brexit Response Team has been advocating for some time and which is summed up as follows, “Prepare for Maximum Change and Act Now”.
While engaging in scenario planning, the negative implications of Brexit which have been identified above have been discussed and strategies have been adopted by Irish business to mitigate their impact. These have conducted through Brexit labs which facilitate in depth analysis of issues related to specific businesses and sectors. I can give one example of an Irish business that had serious concerns about the impact of currency on the business in the period immediately after the referendum and how it could obliterate the business. Through a process of engaging in scenario planning and becoming more familiar with some of the implications, they have identified a niche opportunity and now see Brexit as an opportunity for their business to grow.
In many cases, scenario planning is about identifying an issue and seeing how that can be turned into an advantage. The UK is the largest market for very many Irish businesses. Such businesses are genuinely concerned about the impact of Brexit. However solutions are beginning to emerge. Irish companies are looking at establishing a base in the UK whether through acquisition or setting up a new operation. As a corollary, if Irish companies are fearful of losing trading relationship with UK suppliers or markets, equally UK companies are fearful in terms of European suppliers and markets. While this will not work for everyone, the opportunity is there for Irish business to expand into European markets which may not have been considered before now because of the proximity of the UK market.
Both the business and political communities in Ireland have identified certain sectors which could be attracted to Ireland post Brexit. Prominent among these are opportunities in the financial services, LifeScience,IT and education sectors. However there is an increasing awareness that it need not stop there. If an Irish business wants to continue trading with the UK, a potential solution is to consider establishing a base in the UK. Commercial logic indicates that UK companies that want to continue to trade with EU countries should find establishing a presence in Ireland attractive. This must also present opportunities for strategic alliances and joint ventures. One important factor in all of this is maintenance of the Common Travel Area which has been recognised by the Ireland, the UK and the EU as important to retain.
There remains significant challenges and uncertainties for Irish business associated with Brexit. However Brexit also brings opportunities and it is important for businesses to undertake scenario planning to mitigate the risks and identify the opportunities. Most businesses in the UK have not accepted the proposition that “No deal is better than a bad deal”. In an Irish context, “No Brexit is better than Brexit”. While this approach is unlikely to prevent the final destination being reached, it might ameliorate the position for Irish business and the economy as a whole by constantly reinforcing the need for the position of business to be reflected in any negotiations.