One year into pre­par­ing for Brexit

Irish Examiner - Supplement - - FOOD & DRINK IRELAND -

In the year since the UK made the his­toric de­ci­sion to chart its fu­ture outside the EU, much ink has been spilled on fath­om­ing the po­lit­i­cal and eco­nomic im­pli­ca­tions for Ire­land and the food and drink in­dus­try in par­tic­u­lar.

The UK is by far our largest food and drink ex­port mar­ket, worth over €4bn in 2016, and while our trad­ing re­la­tion­ship pre­dates the EU and the Sin­gle Euro­pean Mar­ket, it has flour­ished to an ex­cep­tional de­gree within the frame­work of both. This re­la­tion­ship is very much a two-way street: Ire­land is also the UK’s most im­por­tant food and drink ex­port mar­ket, with im­ports from our near­est neigh­bour val­ued in the re­gion of €4bn last year.

While ge­o­graph­i­cal prox­im­ity and a finely matched pro­file of sup­ply and de­mand un­der­pin this re­la­tion­ship, so too do shared cul­tural val­ues and com­ple­men­tary world­views: we are uniquely well suited to sup­port and meet each other’s food needs. It is against this back­drop that Brexit, and par­tic­u­larly the vari­ant that puts the UK not only outside the EU but also the Euro­pean Eco­nomic Area and the Cus­toms Union, presents it­self as a deep and un­par­al­leled chal­lenge.

Bord Bia laid the prepara­tory ground­work for ad­dress­ing the chal­lenge of Brexit in ad­vance of the June ref­er­en­dum and, notwith­stand­ing the fact that, a year later, no greater clar­ity has emerged on the ul­ti­mate form de­par­ture will take, our re­sponse has evolved into a strat­egy and se­ries of sup­ports that takes into ac­count likely short, medium and long-term im­pacts.

In early 2017, we launched the Brexit Barom­e­ter, an an­a­lytic tool de­vel­oped in con­junc­tion with PwC Ire­land and de­signed to help in­di­vid­ual com­pa­nies as­sess six spe­cific risk ar­eas as­so­ci­ated with Brexit — routes to mar­ket, cus­toms and tax, sup­ply chain, trade, cur­rency and hu­man re- sources. An ex­pres­sion of our com­mit­ment to pro­vide sup­ports that are based on facts and data rather than spec­u­la­tion or anec­dote, the barom­e­ter is de­signed to give in­di­vid­ual, tai­lored feed­back to com­pa­nies with re­gard to their risks and vul­ner­a­bil­i­ties, and to flag those ar­eas where pre-emp­tive ac­tion can and should be taken.

The de­vel­op­ment of the barom­e­ter is fur­ther un­der­scored by recog­ni­tion that, while Brexit re­mains, in a gran­u­lar sense, a se­ries of un­knowns, there are many ways to pre­pare for its even­tu­al­ity and to mit­i­gate the risks that will come from its pos­si­ble per­mu­ta­tions.

Among these per­mu­ta­tions, few raise more con­cern than the pos­si­bil­ity of a hard Brexit, where puni­tive WTO tar­iffs could con­ceiv­ably shut out our dairy and beef trade from our old­est and largest mar­ket. While no even­tu­al­ity can yet be ruled out, there are sev­eral rea­sons why this ‘ Dooms­day sce­nario’ should not as­sume un­due promi­nence in our prepa­ra­tions for what lies ahead. Firstly, to al­low it to do so would feed into the in­cor­rect, and highly coun­ter­pro­duc­tive, as­sump­tion that plan­ning for Brexit is sim­ply a mat­ter of await­ing and re­spond­ing to a tarif f and cus­toms regime, what­ever that might ul­ti­mately be. Sec­ondly, it ig­nores the more fun­da­men­tal ques­tion as to what al­ter­na­tive trade re­la­tion­ship could mean­ing­fully sup­plant that which cur­rently pre­vails be­tween Ire­land and the UK, as well as our peers in the EU.

The UK is a coun­try that proudly claims some of the high­est re­tail and food safety stan­dards in the world. To will­ingly ex­pose it­self to the mas­sive op­er­a­tional and rep­u­ta­tional risks that would come from rout­ing en­tire sup­ply chains outside the EU would be, to say the least, po­lit­i­cally and eco­nom­i­cally un­prece­dented. It would test the con­cept of food se­cu­rity in a mod­ern in­dus­trial na­tion to its limit.

None of this is to take from the fact that a new and daunt­ing re­al­ity is about to un­fold. Brexit will de­mand a nu­anced and con­certed re- sponse from ev­ery level of the food in­dus­try. It will re­quire new skills, new ap­proaches and new think­ing. It is a bat­tle that will not be fought on one front but on many, and it will de­mand a deep im­mer­sion in the ar­eas of risk mit­i­ga­tion, di­ver­si­fi­ca­tion, cus­toms and tar­iff man­age­ment, cur­rency hedg­ing and re­la­tion­ship build­ing. We will need to be ag­ile, in­formed and pre­pared as never be­fore.

These are de­mands that will be made on Bord Bia as much as the in­dus­try we rep­re­sent, and we are cur­rently en­gaged in a comprehensive re­view of our struc- tures and po­si­tion­ing to en­sure that we per­form to the level re­quired of us in this chang­ing and chal­leng­ing en­vi­ron­ment.

To talk of the im­pact of Brexit, it is well to note, is not sim­ply to spec­u­late on fu­ture sce­nar­ios. Cur­rency fluc­tu­a­tions in the aftermath of the June ref­er­en­dum quickly brought home the cost of the de­ci­sion to Ir­ish food and drink ex­porters, as it re­duced the value of ex­ports to the UK by €570 mil­lion over the course of 2016. Against this, how­ever, must be set the coun­ter­weight of mar­ket di­ver­si­fi­ca­tion, which con­trib­uted to an over­all picture of ex­port growth of 2% in the same year.

The record € 11.15bn achieved by Ir­ish food and drink ex­porters in 2016 was built in no small part on strength­en­ing per­for­mances in con­ti­nen­tal Europe and the in­ter­na­tional mar­ket. Em­blem­atic of this is the fact that China is now Ire­land’s sec­ond largest dairy ex­port mar­ket, a po­si­tion di­rectly at­trib­ut­able to our high qual­ity sup­ply base, our world class R& D and our strength­en­ing in­vest­ment in mar­ket­ing.

Ire­land’s food and drink in­dus­try has weath­ered sig­nif­i­cant chal­lenges in the past. It has done so demon­strat­ing a firm con­vic­tion that our best re­sponse is a col­lec­tive one. As we await the first ev­i­dence of how Brexit will take form, nei­ther Bord Bia nor the in­dus­try will ob­serve pas­sively. The global con­text in which Ire­land has set out to be a pre­mium sup­plier of qual­ity food re­mains a pos­i­tive one, while our ac­tions in sus­tain­abil­ity, through the Ori­gin Green pro­gramme, con­firm Ire­land’s abil­ity to pro­vide in­ter­na­tional lead­er­ship on the fu­ture di­rec­tion of the food and drink in­dus­try.

To­tal com­mit­ment to be the source of the high­est qual­ity food and drink and to de­velop trade re­la­tion­ships built on trust and re­spon­sive­ness have been the plat­form on which our in­dus­try’s suc­cess has been built to date. This is one cer­tainty that will not change as we em­brace and man­age the chal­lenge ahead.

“Ire­land has been cho­sen as a lo­ca­tion for in­vest­ment by ma­jor food, drink and in­fant nu­tri­tion com­pa­nies like Coca-Cola, Pep­siCo, Di­a­geo, Fer­rero, Kraft, Wyeth, Abbott and Danone. “

Cur­rency fluc­tu­a­tions quickly brought home the cost of Brexit to Ir­ish ex­porters

Claire Pri­est­ley, fi­nance di­rec­tor with Marks & Spencer Ire­land; Owen McFeely of PwC Ire­land’s re­tail and con­sumer prac­tice; and Tara McCarthy, CEO, Bord Bia, at a PwC Re­tail Con­sumer Break­fast Brief­ing deal­ing with the Brexit chal­lenges. Picture:...

De­sign­ers’ Choice win­ner Oliver Schur­mann at Bloom 2017, Bord Bia’s cel­e­bra­tion of Ire­land’s gar­den­ing and hor­ti­cul­ture sec­tor­which saw 31,000 peo­ple visit the Phoenix Park, Dublin. Photo: Iain White / Fen­nell

Bord Bia CEO, Tara McCarthy, with Pres­i­dent Michael D Hig­gins and Sabina Hig­gins at Bloom 2017 . Photo: Chris Bellew / Fen­nell

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