Catherine Moroney, Head of Business Banking, AIB, answers hard questions about Brexit.
PARTNER CONTENT IN ASSOCIATION WITH AIB
Are AIB concerned about the impact of Brexit?
We are very concerned about the level of planning that businesses have undertaken to date. AIB’s Brexit Sentiment Index suggests that over 50% of businesses have yet to start planning for Brexit. While it is challenging to plan for such an uncertain outcome, we would encourage businesses to consider the worst case impact on their business and identify any vulnerabilities in their business.
Which businesses and business sectors should be concerned about Brexit? All businesses irrespective of sector, scale and geographic location should be concerned about the impact of Brexit?
We talk about direct and indirect impacts. Businesses that trade directly with the UK have a clear direct exposure to Brexit. Many of these businesses have been accustomed to managing the currency risk associated with this trade over the years. However, Brexit now poses significantly more challenges.
Almost all businesses are impacted indirectly by Brexit. Ireland has a significant supply chain reliance on the UK, almost all Irish businesses buy goods and services from Irish suppliers that originate in the UK or via the UK, so Brexit touches all businesses and ultimately all Irish consumers.
In addition, a Hard Brexit would have a negative impact on the Irish economy overall. Businesses that rely on a strong domestic economy and strong consumer spending would be impacted by any impact on the economy.
What are the key risks that businesses should consider?
Essentially, Brexit and a hard Brexit in particular will add cost to Irish business. It’s important for businesses to understand what impact additional costs may have on their cash flow and their working capital requirements. This will enable you to plan and make key decisions. Some important areas to consider:
Review your supply chain, whether you are directly or indirectly impacted. Discuss your concerns with suppliers, particularly if you have key suppliers within the UK that are strategically important to your business. Understand what their Brexit plans are and how they might minimise the risk to your business. You may need to identify alternative suppliers outside of the UK or consider how your business could manage increased costs – what can be passed on and what you may need to absorb.
Exchange rate volatility is a key risk for businesses trading directly with the UK. We encourage all businesses with a sterling exposure to discuss with their bank the appropriate solutions to mitigate this risk. This will help protect your revenue and provide greater cost certainty.
Customs and tax:
In a hard Brexit scenario, the UK will become a 3rd country from a trade perspective. Businesses importing into Ireland from a non EU country are liable for Import VAT and Customs Duties where applicable which must be settled at the point of entry. There is also considerable time and cost associated with customs administration. Some businesses may require the support of a customs agent. Businesses exporting to the UK will also experience similar procedures, costs and challenges. We encourage customers to talk to Revenue about what steps they need to take to manage customs requirements and liabilities. Early engagement is key to ensure that in a hard Brexit scenario businesses can continue to move goods in and out of Ireland.
What can businesses do now?
I encourage businesses to review how Brexit may impact their working capital. To do that consider the following;
Understand your exposure to Brexit by taking our online Brexit Ready Check, a quick, useful and free tool, which we have developed to help support SMEs;
Talk to your bank about your working capital requirements. While you may not yet require additional finance, it is good to start the conversation. We have a team of 21 local Brexit Advisors who are in place to support you;
Get advice; there are a range of supports available from your Local Enterprise Office, Enterprise Ireland, Bord Bia and Intertrade Ireland that you should consider. n