Brexit con­cerns stall food sec­tor

Irish Examiner - - Front Page - Ge­off Per­ci­val

Al­most a third of food sec­tor SMEs have de­layed in­vest­ment in the past three years due to Brexit.

Re­search from PwC shows that skills’ short­ages; po­ten­tial trade tar­iffs; op­er­a­tional costs such as en­ergy, in­sur­ance and rates; and volatile com­mod­ity prices are hold­ing back com­pany growth.

Al­most a third of Ir­ish food sec­tor SMEs have de­layed in­vest­ment de­ci­sions over the past three years due to Brexit un­cer­tainty.

Re­search from PwC shows that 31% of food-re­lated SMEs have stalled in­vest­ment since the 2016 Brexit ref­er­en­dum in the UK, with ar­eas like pro­duc­tion ca­pac­ity, op­er­a­tional re­sources in­no­va­tion and mar­ket­ing par­tic­u­larly hit.

The re­search also shows that skills short­ages, po­ten­tial trade tar­iffs; op­er­a­tional costs such as en­ergy, in­sur­ance and rates; volatile com­mod­ity prices and em­brac­ing the sus­tain­abil­ity agenda are hold­ing back com­pany growth.

Over­all, how­ever, PwC’s lat­est food sec­tor re­view found an op­ti­mistic out­look; with 96% of food-re­lated SMEs hav­ing cap­i­tal in­vest­ment plans in place for 2020 and 88% ex­pect­ing to generate rev­enue growth next year. Of those with spend­ing plans, 10% said theirs would amount to in ex­cess of €3m.

With few com­pa­nies ex­pect­ing to achieve price in­creases, mar­gin im­prove­ments are set to be de­rived from ad­vances in tech­nol­ogy and op­er­a­tional ef­fi­cien­cies.

“The UK will exit the EU at some point and that will give rise to new op­por­tu­ni­ties for man­u­fac­tur­ing food prod­ucts in Ire­land that may have been sup­plied from the UK,” ac­cord­ing to PwC’s Grace McCullen.

How­ever, while busi­ness growth is ex­pected to con­tinue into 2020, a soft­en­ing in the wider econ­omy is an­tic­i­pated.

Only 16% of food SMEs feel that the Ir­ish econ­omy will grow fur­ther in 2020, with as much as 34% fore­cast­ing a de­cline.

PwC said the ma­jor­ity of food SMEs are fo­cused on Ire­land for growth and see ex­pan­sion into ex­port mar­kets as an area for po­ten­tial de­vel­op­ment.

How­ever, a Gov­ern­ment of­fi­cial has said Ir­ish SMEs

— across all sec­tors — have un­der­per­formed in terms of ex­port­ing, with only just over 6% cur­rently do­ing any busi­ness over­seas.

“We do not have enough SMEs ex­port­ing, but we are look­ing to get that to 9% within five years,” said Eoghan Richard­son of the SME and en­trepreneur­ship pol­icy unit of the Depart­ment of Busi­ness, En­ter­prise and In­no­va­tion.

Speak­ing at a re­gional en­ter­prise con­fer­ence in Kells, Co Meath, Mr Richard­son said in­ter­na­tion­al­i­sa­tion is one of the big is­sues for the SME sec­tor, but ac­knowl­edged ac­cess to fund­ing re­mains a con­straint.

On the same theme, En­ter­prise Ire­land’s re­gional di­rec­tor for the mid-east and mid­lands Michael Brougham said: “Com­pa­nies need to con­sider re­ally am­bi­tious projects of a pan-Euro­pean scale — sig­nif­i­cant global projects. And the other peo­ple who need to think about the am­bi­tion level are our­selves, the fun­ders, be­cause the max­i­mum you can get at the mo­ment is €5m.”

While smaller com­pa­nies may still find it dif­fi­cult ac­cess­ing fi­nance, Cork-based in­ter­na­tional dairy, in­gre­di­ents and flavours busi­ness Car­bery Group has landed a €78m loan from the Euro­pean In­vest­ment Bank (EIB) to fund its ex­pan­sion and di­ver­si­fi­ca­tion ef­forts.

Car­bery will use the loan, which has a 12-year re­pay­ment dead­line, to di­ver­sify its range of cheeses and pro­duce moz­zarella for ex­port to a num­ber of coun­tries.

It marks the first time the EIB has sup­ported in­vest­ment in the Ir­ish co-op­er­a­tive sec­tor in 45 years and the first Ir­ish in­vest­ment un­der its ded­i­cated agri­cul­ture fi­nanc­ing pro­gramme.

“That Car­bery has se­cured the first ever Euro­pean In­vest­ment Bank fi­nanc­ing for an Ir­ish agri-foods busi­ness is a vote of con­fi­dence in Car­bery and Ir­ish agri­cul­ture,” said Car­bery Group chief ex­ec­u­tive Ja­son Hawkins.

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