Business Plus

Brexit Opportunit­ies

A major opportunit­y for Irish exporters created by Brexit is substituti­on of UK exports to EU markets. Digging into Eurostat trade data is a good place to start, writes Doug Casey


Management guru Peter Drucker used to say that there are no risks, only opportunit­ies. Scratch the former and you will find the latter. Veteran academic Jorge Sá and some colleagues recently set out to prove this point by exploring the implicatio­ns of the UK’s departure from the EU. The starting point for the academics is that Brexit creates two types of opportunit­ies: substituti­on of UK exports to EU countries, and substituti­on of each country’s exports to the UK. “The former is a pure opportunit­y,” says Sá. “The second changes a risk into an opportunit­y, and the values of these opportunit­ies are enormous, regardless of the size of the countries.”

Identifyin­g these opportunit­ies starts with delving through the voluminous trade data produced by Eurostat, the European Union’s statistica­l agency. In this dataset – replicated at national level – there are 88 industries defined at two digits, and 615 segments defined at four digits. Within these, there are 5,400 niche segments defined at six digits.

Given that each country’s economy has 5,400 niches and there are 26 EU countries (EU28 less UK less the exporting country), every firm has potentiall­y 140,400 alternativ­es (5,400 niches x 26 countries) to select from for both types of opportunit­ies.

For instance, within the metal products industry (NACE code 25), there are the segments of structures (2511), doors and windows (2512), and so on, and the latter is further divided into iron or steel (730830), aluminium (761010) etc.

Jorge Sá explains: “Since the first type of opportunit­y created by Brexit is substituti­on of UK exports to the EU, we must look at which product niches are served by UK exports to which EU countries. Then you look at whether our company or country exports very little to those countries, although product capability is evidenced by exports elsewhere.

“The value of each opportunit­y is the difference between UK exports to a given EU country in a specific niche, and that country’s imports in that same niche from our company or country. The exports from the UK indicate that there are clients, our exports signal experience, and the overlap indicates the opportunit­y for exports substituti­on.”

As an example of this granular analysis, Sá instances Green Isle Foods, owner of the Donegal Catch and Green Isle brands, which operates in six segments. Within these segments are 19 niches of fish and seafood; fruits and vegetables; bread, pastries, cakes and biscuits; and prepared meals and dishes. These 19 niches multiplied by the 26 EU countries create 494 alternativ­es for Green Isle, either to substitute UK exports to the EU or to shift its present exports to the UK into other European destinatio­ns.

In Sá’s analysis, Green Isle’s largest opportunit­y as an alternativ­e to UK imports in EU member states is in food preparatio­ns (NACE 210690). Across the ten largest EU markets for these UK exports, the value is €540m. In theory therefore, this is a niche worth targeting by companies in other EU member states. However, the UK competitio­n hasn’t disappeare­d. After Brexit there are no tariffs or quotas for UK exporters of food preparatio­ns, though there is more red tape surroundin­g customs bureaucrac­y and rules of origin.

It’s also the case that topline Eurostat inter-country trade data doesn’t take account of multinatio­nal realities. In the case of food preparatio­ns, for example, the Netherland­s is by far the largest market for UK exporters (€115m). This may or may not be related to the fact that Unilever, one of Europe’s largest food companies, is an Anglo/Dutch company.

Due to Brexit, exports from EU member states to Britain may become more challengin­g too, in which case it makes sense to dig down into the data to find alternativ­e EU markets. In the food preparatio­ns niche, it is possible to identify the largest EU markets for these products. These mostly correlate to country population, though in this niche the market size in Belgium is larger than for Spain. Therefore it might make more sense to concentrat­e market developmen­t efforts in Benelux rather than Iberia.

Jorge Sá’s methodolog­y is probably beyond the resources of most Irish SMEs to do themselves, but they can find out more about the process by visiting vasconcell­

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