Irish businesses stockpiling raw material ahead of Brexit
Revenue reports seven-fold rise in applications for customs registration needed to maintain UK trading
THE clearest evidence yet has emerged of stockpiling by Irish businesses ahead of Brexit in the latest evidence of how the UK’s planned exit from the EU is hitting Irish industry.
With 27 days to go before Brexit, Irish manufacturers have increased stocks of raw material at a record pace, according to the latest Manufacturing Purchasing Managers Index (PMI) from AIB.
Separately, new figures from the Revenue Commissioners show a nearly seven-fold increase since the start of the year in the number of Irish companies applying for key customs registrations needed to trade with the UK, after it leaves the EU Single Market.
The number of applications for an Economic Operators Registration and Identification (EORI) number increased to 2,617 by the end of the week from 384 at the start of January. It compared to 2,976 applications for all of 2018.
Having an EORI number for customs and excise is the minimum requirement for businesses to be able to move goods in and out of the EU customs area.
In the last seven days, 416 businesses have applied for the EORI customs registration. Stockpiling materials ties up business capital but it is a protection against any disruptions to supply chains that will happen if the UK crashes out of the European Union without a deal on March 29.
The latest evidence for Ireland tallies with comments late last month by Gene Murtagh, the chief executive of Irish insulation giant Kingspan, who told the Irish Independent that companies in the UK had been stockpiling ingredients, raw materials and other goods.
“Pretty much every warehouse in the country (the UK) is full,” he said.
While Irish manufacturing businesses are stockpiling materials, many firms are delaying more long-term investment.
The heads of Bank of Ireland and AIB also both said this week that they have seen evidence of investment decisions being delayed by their small and medium enterprise (SME) customers, until there’s clarity on what form Brexit will take.
Overall, the PMI Index shows manufacturing activity in robust condition in Ireland.
The PMI index was created to provide a single-figure reading for conditions in a sector on a scale either side of 50, where numbers up from 50 show growth and down from 50 chart decline.
The Irish manufacturing PMI posted 54 in February, up from 52.6 at the start of 2019.
Action to mitigate supply chain disruptions are the main Brexit effect in evidence in February.
AIB chief economist Oliver Mangan, said: “The impact of Brexit was evident in many of the components of the PMI as some firms moved to take action to avoid possible disruption to supply chains.
“Some firms also reported rising demand from the UK ahead of Brexit,” he said.
It shows preproduction inventories increased at the fastest rate in the near 21-year PMI history. Stocks rose in 11 of the past 12 months.
A number of panellists surveyed for the Index said they had brought forward purchases in order to secure raw materials in case of any stock problems due to Brexit, although some companies had raised their buying activity due to stronger customer demand.
However, the AIB’s Oliver Mangan added that uncertainty about Brexit saw business optimism slip to its lowest level in 18 months.
Many firms are also delaying investing over the longer term