10 Nov 2017 | 09.20 am
Brexit: Risk And Opportunity For Ireland’s Exporters
Now is the time for Irish SMEs to seriously consider exporting to the eurozone
10 Nov 2017 | 09.20 am
Whilst there are clearly risks associated with Brexit, Bernard McCarthy, Managing Director of DHL Express Ireland, puts forward the view that the shock to the system that Brexit has created may just provide the required impetus for Irish exporters to ‘spread their wings’ and look to markets beyond the UK
There can be no doubting the importance of the UK as an export market for Irish exporters, and in 2016 approximately 11% (€13.3bn) of goods exports went to the UK. This represented a decrease of 4% compared with 2015, but given the extent to which sterling devalued following the Brexit vote (effectively making Irish exports significantly more expensive), this is entirely understandable.
What is encouraging is that Irish exports to the UK appear to have weathered the storm. In the first quarter of 2017, the CSO reported renewed growth, with the total value of UK exports rising by approximately 4%. This is impressive considering that during Q1 2016 the euro was trading around 75p, whilst the corresponding rate in Q1 2017 is around 85p, or 13% higher.
So all things considered, it’s fair to say that Irish exporters to the UK have shown great resilience and staying power in the face of the significant depreciation of sterling. That said, the challenges ahead remain very significant, with more than 40% of all Irish agri-food exports going to the UK.
Regardless of their sector, SME exporters, in general, are most exposed to the UK market. It is estimated that circa 40% of Irish SME exports go to the UK. Furthermore, the UK is typically the ‘starter-market’ for SMEs when they first embrace the export challenge. With the prospect of the re-introduction of customs formalities and the likelihood of trade tariffs in the future, the UK will clearly become a less attractive proposition.
However, there may be a silver lining to the Brexit cloud. SMEs who can develop into new markets outside of Britain will mitigate the risk that Brexit represents. And the wider EU is the obvious starting point in terms of market opportunity. The European Union (excluding the UK) represents a market of around 450 million consumers.
EU markets are readily accessible with excellent transport links and of course across the single market there are no customs restrictions for the vast majority of goods. Most importantly for the SME exporter, there is no currency risk associated with the 18 countries that make up the eurozone.
Interestingly, Enterprise Ireland has picked up on this very point. The agency’s new ‘Eurozone Market Strategy 2017-2020’ policy document talks about “inspiring and supporting ambitious business leaders to increase the reach of their businesses into the eurozone and build the scale of their business within Eurozone markets”. There are ambitious targets associated with this strategy – the 50% increase in exports to the eurozone envisaged over the period would represent “a shift in the global footprint of Irish exports from UK to eurozone”.
So the advice to SME exporters is to get on board with this programme and in the first instance to contact their Local Enterprise Office. There is funding and support available to build awareness of eurozone opportunities, increase market research, and help identify new market and sector opportunities, and there is a strong commitment at official level to make this happen.
SME exporters that successfully embrace the market diversification challenge will ultimately build stronger and more successful businesses. If Brexit provides the required impetus to make this happen, as a trading nation we can come through the Brexit process stronger than we were at the outset.
For more information on international exporting please visit www.dhlguide.ie