Food Drink Ireland underscores “urgent support measures” in latest Brexit report

12 Nov 2020 --- The Irish F&B sector needs “urgent support measures” as it anticipates financial disturbances related to Brexit. With the end of the transition period now only 50 days away, Food Drink Ireland (FDI) has published a new economic analysis on the challenges that lie ahead.

The report holds that funds amounting to 5 percent of the current annual export sales value to the UK will be needed annually, from domestic and EU sources, for at least three years.

“The Irish food and drink sector is by far the most exposed of any sector in any country in Europe to Brexit – deal or no deal,” says FDI Director Paul Kelly. 

“Supports are urgently needed not just to save companies within the F&B sector, but also the jobs, communities and downstream suppliers reliant on them, including the farming sector and its longer-term sustainability.”

Exports to UK markets
In 2019, over 37 percent of Irish food and drink exports, valued at €4.5 billion (US$5.3 billion), went to the UK market, Kelly underlines. 

“In contrast, other member states typically see less than 10 percent of their food and drink exports go to the UK market,” he flags. 

“The Irish food and drink sector is by far the most exposed of any sector in any country in Europe to Brexit – deal or no deal,” says FDI Director Paul Kelly.Significant additional costs for Irish food and drink companies could potentially arise from additional customs procedures, regulatory burdens and rising transport costs.

“Along with this, our research shows the sector has a high employment multiplier effect, supporting employment in other diverse sectors within the economy,” Kelly continues. 

Over the past decade, the F&B sector spent over €120 billion (US$141 billion) in payroll and purchases in the Irish economy, accounting for 45 percent of all of the manufacturing exporters, according to FDI. 

Domestic supply chains
Purchases of materials from primary producers and other domestic firms in their supply chain accounted for €82 billion (US$96.6 billion) of this amount. Intermediate purchases made by food and drink producers from the agriculture sector in 2012 made up 85 percent of the agricultural sector's total external product flows. 

“This level of purchasing is the main facilitator of farm incomes and investment in the Irish economy. Failure to address the serious economic disturbance that will follow the end of the Brexit transition period would have devastating effects on the wider economy,” Kelly underscores. 

These state aid supports and funds are drawn from the EU’s €5 billion (US$5.8 billion) Brexit Adjustment Reserve should be targeted as follows: 

• Enterprise stabilization: Short-term measures to allow the Irish government to reintroduce the Employer Wage Subsidy Scheme for Brexit-impacted companies in a no-deal scenario. The scheme should be put on a scenario-contingent footing and be reintroduced temporarily where firms are struggling due to immediate loss of income or substantial cost increases due to Brexit. 
• Investment in competitiveness: Medium-term measures to allow the Irish government to introduce investment aids to support Irish companies invest in enabling technology, management training innovation to regain competitiveness following the UK’s departure from the single market. 
• Improve export capability: Introduce a state-supported export credit insurance scheme to ensure the expected gap in the supply of export credit insurance does not impact Irish firms’ ability to export. 
• Diversification and Innovation: Additional funding for direct grant support for innovation, marketing and trade promotion for companies looking to build new markets in the EU and internationally. Ensure state agencies make full use of the new state aid guidelines to fund up to 50 percent of R&D projects which support future business growth. 
• Direct connectivity to continental markets: Ensure sufficient accompanied roll on and roll off capacity for direct ferry routes to the continent. 
• Customs skills: Provide direct support to cover the additional ongoing costs associated with developing and maintaining customs clearance capability. These supports will be required throughout the remainder of 2020 and 2021. 

Also, a tariff support mechanism will be required in the event of no-deal: 

• A fund to offset the tariff amount imposed by the UK on the most exposed sectors. This would allow industry to keep trading with a UK customer base, maintain its UK market position and avoid massive displacement of produce onto EU markets with consequent price collapse. The fund should also offset the impact of EU tariffs on indigenous manufacturers importing critical raw materials. 

In September, European agri-food groups were reiterating how a failure to reach a deal on EU-UK trade relations would result in “a devastating double whammy” for farmers and agri-food businesses who are already struggling to cope with the fallout of the COVID-19 pandemic.

Securing high food safety standards is also becoming a greater concern as the end of the Brexit transition looms. Various agri-food stakeholders – including farmers, chefs and charities – are urging the UK government to uphold and even bolster current protections and safeguards on food as fears escalate that Britain would be flooded with low-quality imports in trade deals with the rest of the world.

Edited by Elizabeth Green