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Column: Brexit is dangerous for Ireland if we're not prepared

Irish businesses develop their international business plans to mitigate against the risks coming down the road, writes Hugh Torpey.

Hugh Torpey Irish Management Institute

IRELAND IS AN export country. We look outwards. Relentlessly positive in our mindset (and unrelentingly pessimistic in our words) we have a tendency to assume it’ll all work out, that ‘it’ll be grand’.

Sometimes though, a force comes that is just a little too big to get our heads around, a little too all-encompassing to simply wave away with a shrug. The solution used to be when these forces came along was to hit the bar and wait for it to pass by; nowadays it requires a bucket of coffee and countless brainstorming sessions in case it rolls over us.

Brexit is such a force.

The relationship won’t be the same

Every Irish exporter is aware of the dangers, and possibilities, of Brexit, and have probably elucidated these views at the end of a board meeting or over the dinner table. They have read the business papers, mentally taking note of those aspects of Brexit that will affect them, and have kept a keen eye on the exchange rates as they’ve fluctuated since June 2016.

Most Irish exporters, however, haven’t written anything down. There is no plan, just a feeling that we may have to be more flexible down the road. Maybe there’s vague notions that the Chinese market is opening up so ‘we must look into it’ or perhaps there’s a feeling Brexit won’t really happen. It will.

Maybe not in the ‘Hard Brexit’ that was the prevailing political wind until recently, but the UK is leaving the European Union and the relationship won’t be the same for the foreseeable future. It is now incumbent for Irish businesses, and exporters in particular, to develop their international business plans to mitigate against the risks coming down the road.

80% of Irish exports are either sold directly in the UK or transit through the region. Do Irish organisations have alternative market strategies in place? Does their export wing have plans for any transit barriers that may (suddenly) come into place?

Let’s take the tactical question first – are businesses prepared for a new set of administrative practices associated with transiting goods through Britain if it’s not part of the Customs Union?

Preparing staff or procuring new staff hires

In practical terms, this may mean businesses have to prepare staff or procure new staff hires to make this trade efficient. Imagine if tomorrow all exports needed to transit through Norway instead of Britain, what would be the challenges? What would be the costs associated?

Many Irish businesses are waiting for answers from the government rather than proactively seeking out alternatives themselves. Almost two-thirds of Irish export companies have said they are unprepared for Brexit, and have not put any counter measures in place over the last six months, according to a survey of 600 Irish businesses by Enterprise Ireland.

This is a dangerous strategy. We’ve seen the lack of clarity from all sides of the negotiation table, partly as a negotiation tactic in itself, and it is likely that the rules will come as one big release when negotiations are finalised. In other words, at the last minute.

Foreign Affairs Minister Simon Coveney has stated that companies using Britain as a transit location to other markets could be badly affected by Brexit, but has been unable to accurately track what goods, and it what volume, actually passes through Britain from Ireland. So, when it comes to negotiations on what goods are subject to custom tariffs, they may end up negotiating blind.

This makes it even more vital for Irish businesses to make their own plans. Of course, as the famous Navy Seal quote goes ‘No plan survives contact with the enemy’ but without a plan, we are doomed to fail.

Penetrating new markets

Now let’s return to the first question: If Brexit makes the UK less profitable to trade with, or at the worst-case scenario, becomes uneconomical to trade with, do Irish businesses have a plan to penetrate new markets to cover the gap?

Let’s be clear here, no perfect plan exists. There are too many variables within each sector, too many knowns, and even more unknown unknowns, to accurately sit down today and predict what we’ll need down the road.

And, ironically, when it comes to planning for this, it may be best to ignore the force that is Brexit for now. Instead, now is the time to formulate those international development plans and begin putting in place a plan of action.

The organisations who turn Brexit to their advantage will not be the ones who happen to be picked up by the tide and get lucky (although that will inevitably happen too) but the organisations that take a multi-pronged approach to the problem, tackling it from all sides.

They will not be able to share their plans with the rest of the class because, well, everyone is in a different class. This is a huge problem that will be tackled through a million solutions, tens of thousands of face-to-face negotiations across the world, through public and private sector policies and actions, and through lots and lots of planning.

Hugh Torpey is the Content Manager at the IMI (Irish Management Institute), Ireland’s premier provider of executive education.

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About the author:

Hugh Torpey  / Irish Management Institute

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