Ibec: Ireland should get exemption from state aid rules

EU rules provide for cases of serious economic disturbance, says employers’ group

Brexit and the related slide in sterling fit the definition of a serious economic disturbance, Ibec said.

Brexit and the related slide in sterling fit the definition of a serious economic disturbance, Ibec said.

 

Ireland should be granted an exemption from European Union state-aid rules to provide financial support to food and drink firms adversely affected by Brexit, Ibec has said.

Typically, EU governments can only intervene in cases of clear market failure.

However, the employers’ group said there were provisions within the rules for the use of state aid to remedy a “serious disturbance” to the economy of a member state.

Brexit and the related slide in sterling fit the definition of a “serious disturbance”, Ibec said.

To justify state-aid exemption under existing EU legislation, Food and Drink Industry Ireland (FDII) , the Ibec group that represents the sector, has published a report setting out the unique position and exposure of the food and drink industry here.

It noted that Irish food and drink exports were more exposed to the UK than any other sector across a large number of categories, and were typically four to six times more exposed than the average EU country.

Regional footprint

The report also highlighted the sector’s extensive regional footprint, which included regions which are economically disadvantaged relative to the EU average, making it directly linked to the performance of the whole economy.

The sector currently employs 270,000 people, more than the IT and pharma sectors combined.

Another reason cited for the exemption was the fact food and drink manufacturers account for nearly half of the State’s manufacturing spend, which is pivotal to the health of the economy.

The report also cited previous research which suggested that if sterling weakened further to 90p against the euro, this had the potential to wipe €700 million off the value off our export trade and threaten more than 7,500 jobs.

Markets are expecting the British currency to come under further pressure this week with British prime minister Theresa May likely to signal the government’s willingness to opt for hard Brexit in a speech on Tuesday.

“ There is a compelling case for exceptional state aid support to minimise the economic fallout and job losses,” Paul Kelly of FDII said.

“Already the currency squeeze is putting intense strain on exporters. This pressure is likely to intensify as the challenges and economic costs of a hard Brexit crystallise,” he said.

Ibec proposes the state-aid support should be targeted across a number of areas, including economic stabilisation, which would involve short-term measures to shore up struggling enterprises, similar to those taken during the 2009 economic crisis.

Over the medium term, the organisation suggested, the Government should introduce investment aids to bolster competitiveness, including the greater adoption of technology, investment in plant renewal and expansion, and refinancing.

It also advocated investing in market diversification whereby export financing and export-credit guarantees might be used to develop other international export markets.