The Economist (2017b) describes Irelands dual-economy as a ‘modern’ capital powered by Foreign Direct Investment and ‘traditional’ food businesses that looks to the British market. While the entire Irish economy will be impacted by Brexit, some industries and sectors are more exposed than others. Taylor (2017) states that the five industries impacted the most by Brexit in Ireland are pharmachem, food and beverage, traditional manufacturing, materials manufacturing and electrical equipment. According to a special analysis undertaken by the Department of Finance these most exposed sectors employ 94,000 people. This essay will focus on two industries that will be impacted in the long-term and short-term that fall into both categories; our ‘traditional’ food products of Food, Beverages and Agriculture, and secondly our ‘modern’ capital of the financial and tech services industry. Both industries are affected due to a number of fundamentals factors but Connelly (2017:83) states that while many sectors would enter the Brexit debate with the UK, the sector that would dominate the debate would be the food sector. Firstly the food, beverages and agricultural industry is mostly concentrated outside Dublin in the regions, they are also largely SME’s with low profits which contributes to its sensitivity. At the company level, there are some additional attributes that seem likely to be associated with high degrees of exposure to Brexit. Companies with particularly high levels of export or import-dependency in the UK market relation to their competitors are likely to be hardest hit. Annual exports in goods and services with the UK amount to about €34 billion, or 17 per cent of Irish exports, thus the UK remains the biggest single market for Irish exporters. Net Exports in the Food, beverages and agri business is a two-fold issue, on the one hand there is a massive issue with imports and exports purely in relation to land and secondly in relation to currency fluctuations. This was immediately evidenced by the loss of 70 jobs in one Tipperary mushroom plant, followed by four other mushroom producers in seven months (Connelly 2017). With contracts negotiated in sterling the stronger the British pound the better for exporters, however crippled with the already small profit margins of these mushroom growers and the drop in sterling, small margins were slashed to the point of business closures.
Another factor possibly overlooked in many respects in relation to the food sectors with the majority of the debate circling around the strong emphasis on import-export and the exposure to currency fluctuations, is food standards. As a result of devastating scandals in animal-health including foot and mouth, horse-meat turning up in burgers and bird flu, the food standards across the EU have tightened up drastically (Connelly, 2017). As it currently stands within the single market of Ireland and Britain, all food products must comply with the same rules and standards, however post-brexit the UK will have their own standards and regulations, therefore all food produced over the border in Northern Ireland will be checked by Irish Department of Agriculture, Food and the Marine. Any delays may drastically impact on these perishable goods. Secondly Connelly (2017) explores the threat of cheaper meat products from countries with lower standards. If the UK sign new single trade agreement with other countries with lower standards now, they will be cheaper in prices stance than Irish competitors, also they may not comply with Irish food standards when crossing the border impacting on supermarket chains operating in the whole island of Ireland. The only conciliation may lie with the UK publics confidence in these low standards, although lower prices may overrule. This bilateral trade between Ireland and the United Kingdom is now worth over €1bn a week, and economies of scale means that its affordable for companies to have two processing plants on the island (The Economist, 2017a). This fact resonates especially for Ireland’s most famous product – Guinness. Although the Guinness brewed at the St James’s Gate brewery in Dublin is shipped all over the world, its first point of call a transportation to Northern Ireland in tankers that have become known as “silver bullets”, to be canned and bottled in East Belfast before returning to Dublin for export.
Diageo, the multinational company that owns Guinness, says that these silver bullets make some 13,000 border crossings a year. In company own estimates, even a short delay for theses customs checks by Irish Department of Agriculture, Food and the Marine could add €100 to the expense of each trip, costing somewhere close to €1.3m a year (The Economist, 2017a).
As shown the impact of Brexit to the Irish food, beverages and agri-sector is astronomical for both SME’s and some of Ireland largest companies, and employers, across all supply-chain actions, currency and border controls.