Sterling, uncertainty and cross-border travel - SMEs react
‘It’s a huge period of uncertainty. Business is very much about confidence’
Irish business is considering the implications of Brexit and ensuing uncertainty. Photograph: iStock
On Friday morning medium size business owners found themselves considering everything from millions of euro worth of UK exports to how their employees will get to work across the Northern Ireland border.
Having had a gut feeling which way the result was going on Thursday evening, Martin McVicar, managing director at Monaghan based Combilift, now believes the Irish business world will be hit by a combination of sterling fluctuation and general uncertainty.
“The big problem with the word uncertainty is it delays decision making so it certainly means an immediate loss of business over the next couple of months until there is more certainty,” he said in the hours immediately after the Brexit result came in.
Combilift produces speciality fork-lift style machinery and more than 50 per cent of its exports either pass through the UK or are sold directly into the market, representing about €120 million in sales annually.
A Brexit is unlikely to impact on demand for its particular products but it is well placed to understand the potential fallout for companies generally.
For a start, a sterling devaluation will lead to increasing prices, even if its off-set by purchasing raw materials from the UK. “Someone will have to pay the difference which in reality is the downside,” Mr McVicar said.
There is also the issue of produce passing through the UK.
“Because we are manufacturing heavy engineering products they are road freighted through the UK by trailer and now transit times will be slowed at borders, [probably leading to] resulting costs,” he said.
About 50 Combilift employees travel south of the border every day to go to work and Mr McVicar says he knows plenty of Northern companies with the opposite flow of staff.
“I am familiar with border crossings. It will never get as serious as it used to be in years gone past but I think it’s important that Ireland sit down with the UK government and make sure that movement of people is as easy as possible.”
In Cork, Jim Barry, managing director of the Barry Group, a leading international wholesaler employing about 230 people, believes the result will leave European business vulnerable for quite some time.
“It’s fine to vote for things but I am not really sure if people know what they have voted for,” he said.
“It’s a huge period of uncertainty. I think once we stand back and really take it in we could be quite concerned. Business is very much about confidence.”
Trading since 1955, the UK market represents about 10 per cent of the Barry Group’s business.
“From our perspective we need the UK to be a vibrant market, we export quite a lot there. If England go into a negative period that’s a concern for us,” Mr Barry said.
But the concerns are broader, specifically regarding the global reaction and the potential effects on pricing.
A lot of Irish companies, particularly those based outside Dublin, need another two to three years of economic settlement to address legacy issues from the recession, Mr Barry said.
“I hope it’s something that settles down quickly. We don’t need this. We could have done with another three years of nice steady growth.”
No doubt like many other Irish companies early on Friday, Colourtrend, the Kildare based paint manufacturer, scrambled a management meeting to discuss the fallout.
Although the UK represents just 10 per cent of its exports, it was a market it had been attempting to grow.
“And we are going to have to reassess that now. Certainly this morning the US market is looking more stable,” said managing director Kevin O’Connor.
“I think we have to accept the fact that of all of the EU countries, Ireland is the most affected by this.”
This reference to the UK being Ireland’s biggest trade partner is the concern of the day, while the word is uncertainty.
“Businesses don’t like long periods of uncertainty,” Mr O’Connor said, echoing his counterparts in Irish SMEs.
“I am not sure if industries have done a proper assessment [of the consequences of Brexit] because nobody really expected it.”
While the issue of sterling fluctuations was always there, the UK-Ireland trade landscape is now blemished by the spectre of curtailments on the free-movement of goods and potential tariffs, he said.
Jimmy McGee of Athlone Extrusions, which exports 42 per cent of its products to the UK, said they would maintain that market but at the same time begin to focus elsewhere.
“It’s worrying. We have looked at that over a period of time and the way we looked at that was spreading our markets into mainland Europe and further afield,” he said.
Speaking to other exporters on Friday, he said: “Shock is the only word I can use among a lot of people.
“Do we have borders back in Northern Ireland? What sort of controls do we have in the UK? What happens to Scotland?”