Bracing for Brexit: lack of clarity creating uncertainty for NI business community

The ongoing lack of clarity around Brexit continues to create uncertainty for the Northern Ireland business community and this is likely to be the "new normal" for the foreseeable future.

In the context of these challenges, Ulster University (UU) has been actively engaging with stakeholders to identify key risks – and indeed opportunities – associated with Brexit and to consider how Northern Ireland's businesses might best respond to these.

More than 230 companies responded to the Ulster University Business School Brexit Business Survey in April/May 2017 from a range of sectors. They were mainly based in Northern Ireland (8 per cent were from the Republic) and of varied size. The initial objective was to identify how reliant survey respondents are on the EU, both in terms of trade and access to labour/skills. The sample indicated a reasonable rate of EU reliance:

– respondents export 28 per cent of sales to EU markets (including the Republic, excluding Britain)

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– 29 per cent of respondents’ purchases are imported from the EU (excluding Britain)

– 23 per cent of respondents’ workforce is comprised of nationals from south of the Border

– 18 per cent of respondents’ workforce is comprised of other EU nationals (excluding Britain)

This relative reliance on the EU is important, both at a business operations level in terms of firms importing and exporting, but also in a broader economic context, in relation to accessing skills and labour. Given Northern Ireland’s well-documented productivity gap, it would be concerning from an economic perspective if Brexit hindered the retention of skilled migrant labour.

The survey confirms that the North’s firms are keenly aware of the significant risks that they face as a result of Brexit. Only 6 per cent of respondents considered themselves not to be at risk and 64 per cent of respondents believe that their business will suffer as a result.

The perception of risk to the North’s economy is stronger still; 71 per cent of firms anticipate a detrimental economic impact.

When asked about the specifics of the perceived risks to the Northern Ireland economy, the most commonly cited concern was the current political vacuum, and the implications in terms of ensuring representation of local interests. Perhaps surprisingly, this ranked above the issue of cross-Border trade.

Northern businesses are clearly concerned that the political stalemate at Stormont, and the associated absence of a single voice for Northern Ireland, has the potential to be a considerable detriment. There is an acute awareness of the risks associated with the North being underrepresented during the Brexit negotiation and exit processes.

Response on hold?

So, firms are concerned about Brexit. Yet the survey indicates that three out of four local companies have not sought related support from outside of their own organisation and 70 per cent do not have a plan in place. The level of contingency planning may vary with company size (with smaller firms being comparatively unlikely to have plans in place) so this statistic may in fact understate the level of planning under way.

This response could of course also be reflective of the early stage in the Brexit process (one in five respondents stated that there was no point in seeking external support until the terms of Brexit are known).

Many northern businesses may have also been the beneficiaries of the devaluation of sterling against the euro (post-Brexit vote), and associated boosts to the North’s exports and tourism. As such, for some local businesses, the reality of Brexit has not yet materialised and planning/mitigating against risks may not be an imminent priority.

On a positive note

It is, of course, important to acknowledge potential opportunities associated with Brexit and the survey indicates that some Northern Ireland firms perceive upside risks, including the prospect of striking new trade deals with other foreign markets and potential loosening of regulatory requirements.

A strong majority – 84 per cent – also consider themselves to be reasonably familiar with approaches for dealing with business uncertainty.

What next?

Some 150 business professionals, academics, trade unionists and healthcare representatives gather at the invitation of the university’s vice-chancellor later in the year to prioritise key issues with a view to presenting potential solutions. Among the actions that might be pursued are:

– Developing a regional migration policy for Northern Ireland. It was suggested that a local migration policy should be tailored to be reflective of the unique skill needs of the North’s economy, based on sectoral composition;

– Developing a workforce development strategy to focus on skills development, to address skill gaps and to align with economic need.

– Need for focused social policy to encourage people into work and upskill those already employed.

In relation to the Border, a number of potential solutions were discussed. The reality, of course, is that this will be subject to political will.

The Brexit symposium also considered a range of issues specific to businesses. The following potential practical steps for policymakers and/or businesses were amongst those that arose from these discussions. To co-ordinate an all sector industry approach, businesses might:

– seek to strengthen trading relationships with emerging economies;

– work together to overcome fragmentation and build regional strengths, resources, bridge skills gaps, overcome language barriers and share knowledge.

https://www.ulster.ac.uk/brexit/home

Dr Jodie Carson, senior economist, department of accounting, finance and economics, Ulster University