Almost four in 10 Irish businesses are reporting delays to their supply chain as a consequence of Brexit, while a substantial proportion have changed their export strategies ahead of an expected swelling of Brexit red tape over the next year.
The UK's departure from the EU is already having a substantial impact on Irish businesses, according to professional services firm Grant Thornton, triggering concern that lead times will deteriorate further as a string of new border requirements are introduced from October onwards.
Some 37 per cent of the companies surveyed for Grant Thornton Ireland's International Business Report indicated they were experiencing longer lead times in their supply chains, with 22 per cent needing to recruit alternative global suppliers and 21 per cent saying they had recruited alternative suppliers within Ireland.
Almost a fifth – 17 per cent – said they had outsourced or recruited people to deal with the additional bureaucracy, and 51 per cent identified Brexit red tape and regulations as a constraint to the growth of their company.
“It is likely going to get worse in the next 12 months, as the UK has been employing a light touch up to now,” said Jarlath O’Keefe, Grant Thornton Ireland’s head of indirect taxes.
Pre-notification requirements
From October 1st, agricultural and certain other products imported into Britain will become subject to pre-notification requirements, although the UK food industry has been lobbying for a slashing of the proposed notice period from 24 hours to four hours.
From January 1st, 2022, exports will require both EU and UK safety and security declarations, creating a “double whammy” duplication of red tape on products, while from March 2022, border checks will commence on live animals and certain plants and plant products.
“Irish businesses might need to have a customs agent in place at a UK port to make sure it runs smoothly, and that will be an extra cost,” Mr O’Keefe said.
The timeline of new checks, which Westminster postponed earlier this year, could be pushed back again, he noted. In the meantime, the findings of Grant Thornton’s survey suggest many Irish businesses are already taking steps to reduce their exposure to the more cumbersome trade regime with Britain.
Although a third of businesses say the UK remains the key territory for targeted company growth, Germany was identified as the key territory by 17 per cent of companies and 16 per cent of businesses pointed to the US as the main market for potential export growth.
UK ‘over-reliance’
Mr O'Keefe said the "over-reliance of the past" on the UK was "no longer a reality" for two-thirds of Irish businesses, with some companies also exploring growth opportunities in China and France.
“Businesses are looking to grow in other markets because they recognise that the UK can’t continue this light touch forever,” he said.
Other non-EU markets – such as the US, where individual states operate different rules – “pose their own challenge”.
Senior executives from some 63 Irish businesses were surveyed for the report, which is part of Grant Thornton research with 5,000 mid-market businesses across 29 economies, conducted in the first half of 2021.
Despite the ramifications of Brexit and the trading difficulties exacerbated by the Covid-19 pandemic, three-quarters of Irish businesses said they were optimistic about the next 12 months.
"Businesses remain optimistic for the future, but it's clear that Brexit and the pandemic will have an impact on trade and growth into the future," said Janette Maxwell, associate director in tax at Grant Thornton Ireland.
“International sales present an opportunity to mitigate the financial impact of these global events and, as the world opens up again, businesses will continue to look abroad for expansion of their operation, whether that’s in increased exports or in sourcing more efficient suppliers.”
British companies, meanwhile, are increasingly setting up EU depots to circumvent Brexit requirements as they also battle to overcome domestic supply-chain issues prompted by a severe shortage of lorry drivers.
