Does your business have a Brexit Strategy in place?
Implications and solutions for SMEs trading with the UK
Brexit and Irish business are intrinsically linked.
Regardless of the eventual terms of the exit deal, the UK’s decision to leave the EU will have widespread ramifications for small and medium enterprises (SMEs) across Ireland.
New trading models will undoubtedly create risk (likely more so for UK businesses), but should also bring opportunities for SMEs that are able to adapt quickly.
Here, we’ll outline some of the key risks and opportunities surrounding Brexit, and propose a series of solutions to help you get ahead of the competition.
Brexit and Irish business: potential risks
These are the key risks and opportunities you should be considering now, to optimise your business strategy for the post-Brexit landscape:
In 2016, the UK accounted for roughly one third (approximately €7 billion) of exports from businesses supported by Enterprise Ireland.
However, due to the depreciation of sterling, export growth to the UK dwindled from 12% in 2015 to just 2% last year, with food exporters feeling the effects most keenly.
Cross-border tariffs could cost Irish businesses €250 – €350m per year according to Eoin Magennis, Senior Economist at Ulster University.
Food production is again the sector likely to be most affected by this. Currently, roughly one third of milk produced in Northern Ireland is transported to the Republic of Ireland for processing.
Under World Trade Organisation (WTO) rules, foodstuffs (including beef and dairy) are subject to some of the highest tariffs. Magennis highlighted that 70% of WTO tariffs would be payable on food exports.
Financial support for Businesses affected by Brexit
Increased Eurozone exports
To counter falling UK export rates, Enterprise Ireland has announced a new strategy that aims to increase Irish Eurozone exports by 50% (from €3 billion to €6 billion) by 2020.
The government agency has outlined plans to partner with around 600 businesses. Half of these businesses are classified as ‘Eurozone start’, meaning they’re new to the wider EU market and are still reliant on UK exports (The Guardian).
State aid programme
The Irish Business and Employers Confederation (IBEC) has called on the EU to support a €1 billion state aid programme, designed to shield Irish food and agri businesses from Brexit-related disruption.
Describing the aims of the programme, IBEC Chief Executive, Danny McCoy, outlined how it would enable Irish businesses to “innovate, diversify into new markets, train staff and invest for the future” (The Guardian).
For more information accessing financial aid, grants or other sources of funding and to find out how your business might benefit from either of the above programs please contact us on 01 604 0011.
UK business relocation to Ireland
Ireland as an EU base for UK businesses
Ireland is well positioned as a new home for UK businesses wishing to maintain a strong foothold in EU markets. As the only other English speaking country in Europe Ireland is a great choice for UK businesses seeking to relocate. In fact it has been widely reported that over 100,000 UK businesses have already registered companies in Ireland already.
Similarly for international companies seeking an English speaking EU base Ireland becomes the logical choice.
Galway Chamber of Commerce is aiming to persuade businesses currently based in the UK to relocate their headquarters to the West Ireland city.
The ‘Why Galway?’ campaign – which sent a delegation to London last year – has already attracted significant international investment. Its representatives believe that many UK firms (especially those in financial services) would be keen to switch.
Irish businesses that can help either Irish or UK SMEs adapt to the new commercial landscape are likely to see trade skyrocket over the coming years.
Financial advisors and administration services, business consultants and legal experts will all see demand for their services rise, as businesses struggle to optimise operations post-Brexit.
At Greavy & Co Accountants (greavyandco.ie) we will be launching a package very soon to help smaller UK businesses, worried about the impact of Brexit on their EU trade, to establish a EU base in Ireland.
Strategies for making sure your business is prepared for Brexit
So, now you know a little about the potential risks and opportunities, let’s take a closer look at how you should prepare your SME for life after Brexit:
Brexit negotiations are still ongoing, but you should be thinking about acting before changes come into effect.
Uncertainty is a recipe for disaster in business, and your capacity to adapt will be severely limited if Brexit puts a dent in your cash flow.
Preparing in advance, with detailed scenario planning, can help future-proof your business against any worst-case scenarios. It can also give you a wider range of options with which to maintain, or even enhance, your profitability.
Brexit SME Scorecard
Back in March 2017, Enterprise Ireland launched the ‘Brexit SME Scorecard’.
This interactive online resource enables Irish SMEs to self-assess how exposed they might be to the effects of Brexit, based on six key pillars of business.
On using this tool, you’ll receive a report outlining the types of action you should take and resources you’ll need to prepare for Brexit in the best way possible.
In addition to these recommendations, you should also look to implement broader financial risk mitigation strategies to protect your business and maintain a healthy cash flow.
These strategies could include:
- Establishing a financial contingency/cash reserve
- Auditing and streamlining resources already in use
- Looking for advantageous credit arrangements
- Re-negotiating client payment terms
- Improving financial monitoring and reporting processes
Exploring new markets
As we’ve touched on already, Brexit is likely to open up new overseas markets and opportunities for SMEs that can aid other businesses through the transition.
If your business already relies on exports to the UK it is perhaps time to start evaluating other markets to establish which are likely to be most receptive to your product or service, and take account of any cultural considerations.
Think about whether you could use your expertise, experience and dynamism to help other Irish businesses adapt, or support UK businesses setting up headquarters in Ireland.
Grants to explore new markets
Enterprise Ireland is currently offering a ‘Be Prepared Grant‘ of up to €5,000 to help clients develop an action plan to see them through Brexit.
You must satisfy four basic criteria to apply, including:
- Hold Enterprise Ireland membership
- Complete the Brexit scorecard
- Confirm active trading status
- Demonstrate reliance on UK exports
You can use this grant to pay for consultancy, travel and other expenses needed to establish your action plan. This plan could involve moving into new markets, or increasing operational competitiveness and/or strategic financial capabilities.
Receiving financial guidance
With so many decisions surrounding Brexit and Irish business still to be made, you need a financial partner who can provide you with expert support and advice on demand.
A specialist SME accountant will help put a financial framework in place to re-shape your business for trade after Brexit. They will make sure your business is positioned to grow and take advantage of opportunities or weather any downturn or adjustment period. Additionally the right accountant will allow you to focus on business strategy and growth by removing the monthly burden of tax preparation, bookkeeping and payroll.
We’re entering a transitional period when it comes to Brexit and Irish business – one which you undoubtedly need to prepare for. Use this advice to get your SME on a sound financial footing and ready for life beyond Brexit.
Call on the team at Greavy & Co Accountants to help get your head around Brexit and its implications for your business.
Greavy & Co Accountants Dublin,
8 Clanwilliam Square,
Grand Canal Quay,
(01) 604 0011