A third of Irish businesses cancel or postpone investments over Brexit
Latest AIB Brexit Sentiment Index reveals economic fallout of ongoing uncertainty
Firms in the tourism sector, already feeling the pinch from a weaker sterling, have been the worst hit over Brexit as the industry relies heavily on tourism from Britain. Photograph: Kirsty O’Connor/PA Wire
Some 35 per cent of SMEs in the Republic and 40 per cent in the North say they have cancelled or postponed plans to invest in their businesses due to Brexit, a new report indicates.
The latest AIB Brexit Sentiment Index also reveals that more than half of the companies have yet to begin Brexit planning with fewer than 50 days to go to the UK’s planned exit on March 29th.
The findings come as the UK’s main business lobby group, the Confederation of British Industry (CBI), warned that companies were now in the “emergency zone” due to the uncertainty surrounding Brexit, ahead of the UK’s departure date.
International Monetary Fund (IMF) chief executive Christine Lagarde said no arrangement the UK reached with Brussels would be as good for the economy as membership – and a no-deal Brexit would be “brutal”.
AIB’s report also suggested the number of businesses reporting a negative impact on their business from Brexit in the fourth quarter of last year rose to 32 per cent, from 25 per cent in the previous quarter.
Firms in the tourism sector here, which have already been feeling the pinch from a weaker sterling, have been the worst hit as the industry relies heavily on tourism from Britain.
The report suggested as much as 25 per cent of tourism SMEs are reporting lower sales with 20 per cent reporting higher cost-of-sales.
Unsurprisingly, 68 per cent of SMEs in the Republic believe Brexit will have a negative impact on their business in the future, up from 63 per cent previously. In comparison, 62 per cent of SMEs in the North believe Brexit will have a negative impact on their business.
Businesses in Northern Ireland are more optimistic compared with their counterparts in the Republic, with only 10 per cent of SMEs in the North expecting a hard Border compared with 27 per cent in the Republic.
Catherine Moroney, head of business banking at AIB, said: “As the research shows clearly, businesses in the Republic are concerned about the outlook for their sector as a result of Brexit, with 51 per cent concerned that it will have a negative impact.
“Despite this, formal planning remains low at 8 per cent. This is particularly concerning as Brexit, whether hard or soft, will inevitably result in the need for increased working capital to manage businesses’ cost pressures or possible price inflation should Brexit eventually result in the UK leaving the EU customs union.”
The majority of SMEs (64 per cent) feel that their working capital requirements will stay the same in the next three years, while only 26 per cent feel that they will require additional working capital as a result of Brexit.
Ms Moroney said AIB would continue to encourage SME customers to plan for a hard Brexit scenario and to consider the impact that this would have on their working capital requirements, their supply chain and sub-supply chains.