Post-Brexit rises in border trade costs ‘to hit small firms hardest’
NEW research by InterTradeIreland (ITI) has concluded that small firms will feel the greatest impact from any change to the cost of cross-border trading after Brexit.
Companies large enough to have already expanded into the EU market are more likely to have the resources and scale to continue exporting, it found.
The study, published yesterday by the Newry-based body, used extensive official data from the Northern Ireland Statistics and Research Agency and the Central Statistics Office in an effort to understand exactly how the UK’s withdrawal from the EU will affect small and medium enterprises (SMEs).
The report indicates that 38,799 (77%) of Northern Ireland’s 50,589 businesses employ less than 10 people, while 173,971 firms in the south employ nine or less, representing 91.5% of all businesses there.
ITI, which helps small businesses explore cross-border markets, found that more than 80% of small firms that export from Northern Ireland record all their sales in the Republic.
By contrast, just 6% of Northern Ireland firms sell into the British market solely, without having any export sales over the border or elsewhere.
It found that cross-border trade plays a key role on the island in drawing firms into exporting more.
The study states that firms which export, including cross-border traders, perform better across a range of areas, including turnover, employment and productivity, and in turn, make an important contribution to the performance of the economy.
InterTradeIreland’s director of strategy and policy Aidan Gough said: “Overall, the work suggests that the impacts of any changes in the cost of trading post-Brexit are liable to be felt most particularly by very small firms trading across the border.
“Firms large enough to have already expanded broadly into the EU market are more likely to have the resources and scale to continue exporting either in their current markets or by diversifying into alternative locations.”
The ITI report said there is an increasing probability of a company being an exporter as its size increases. “This is particularly the case for goods firms, with services firms tending to be less export-intensive,” it says.
It adds that the performance gap between exporters and non-exporters, combined with evidence that entry barriers are lower for beginning to export in the neighbouring market, suggests that cross-border trade can be an important stepping stone to broader export participation.
ITI also suggested many firms treat the island as their local market and functional economy.
“Modelling of the characteristics of destination markets for Northern Irish and Irish export flows show that there is a very strong neighbouring market effect on the number of firms trading and on overall export sales,” states the report.
“This shows that the neighbouring market is considerably more accessible than entering ex- porting more generally,” it adds.
“Looking at how business patterns of exporting are determined across broader export markets, membership of the EU facilitates export participation for firms from both Ireland and Northern Ireland, but has a positive impact on average export sales only for Irish firms.
“Increased participation by small firms may come about with some firms selling quite small amounts.”