I thank the Chairman and the members for inviting me here today to discuss the withdrawal of the United Kingdom from the European Union and how Enterprise Ireland is supporting Irish enterprise during this period. As the Chairman said, I am joined today by my colleagues, Giles O’Neill, who is head of the Brexit unit, and Rowena Dwyer, head of policy at Enterprise Ireland.
Most of the members will be familiar with Enterprise Ireland but our remit is the development and growth of Irish companies in world markets. Working in partnership with client companies, the agency assists Irish enterprise to start, grow, innovate and scale in export markets.
In addition to dealing with the impact of Covid-19, Irish enterprise continues to deal with the challenges presented by the UK exit from the EU. Since the referendum in June 2016, Enterprise Ireland has developed and launched a wide range of supports and initiatives to enable Irish business to plan and take action to respond to the opportunities and risks presented by Brexit. During this period, Enterprise Ireland has paid €121 million in supports to the agency’s most Brexit-exposed client companies.
Given the significant concerns relating to customs issues, as part of the Government’s July 2020 stimulus package a €20 million Ready for Customs initiative was announced to provide companies with a €9,000 grant to support the cost of staff to support customs clearance. To date, 828 companies, totalling €11.6 million in grants, have been approved funding.
To further support companies to prepare for Brexit, in October 2020, Enterprise Ireland launched a Brexit Readiness Checker. This online resource allows companies to undertake a quick check on their Brexit readiness and provides guidance on what steps they need to take now. Since January 2021, over 1,100 companies have undertaken this assessment.
In August 2020, Enterprise Ireland undertook a Brexit survey on the national PMI population, that is, manufacturing and internationally traded service companies. The results indicated at that time 42% of companies were fully or significantly ready for Brexit when measured against their four key priority areas.
The good news is that, by the end of 2020, this population of companies reported that 80% had taken action to prepare for Brexit. The trade agreement reached by the UK and EU in December 2020, facilitating tariff-free trade in goods between the two trading partners, was a positive outcome as the potential for significant damage to Irish enterprise arising from a no-deal outcome was avoided.
However, the EU-UK Trade and Cooperation Agreement has fundamentally changed the trading relationship between Ireland and the UK, impacting directly on how businesses and sectors operate in the UK. These changes have the potential to impact smaller businesses significantly, due to their limited bandwidth to incorporate new trading requirements into their business while also trying to sustain and grow their customer base. Notwithstanding this, the UK continues to be a strategic partner of importance for Irish companies. While Enterprise Ireland clients are continuing to diversify their export markets, the UK market remains the largest export market for Irish companies. In 2019, that accounted for 31% of total client exports, at €7.9 billion.
Despite the challenges presented by the new EU-UK trading relationships, and showing the resilience of the Irish enterprise base, a recent survey by Enterprise Ireland showed that 89% of companies see future opportunities in the UK and 83% report that their strategy is to grow exports to the UK. Enterprise Ireland remains committed to working with client companies to assist them to sustain and grow their business, both in the UK and through market diversification.
Trade flows to the UK are changing. Recently published January 2021 trade statistics indicate that the volume of trade between Ireland and the UK is not operating at normal levels. Challenges of complying with customs requirements and stockpiling of goods in quarter 4 of 2020 in preparation for Brexit, substitution with goods from other countries and a reduction in trade volumes due to Covid-19-related restrictions have been reported by traders as contributing to this fall in trade. While the increase in direct connectivity to the European Continent is welcomed and the response of the shipping industry in increasing capacity was unprecedented, the use of the UK landbridge still represents a preferred option for many companies due to its strategic advantages of speed and cost for companies.
Initial engagement by Enterprise Ireland with companies indicates that client companies are adjusting to the new trading relationship, albeit with challenges in the form of increased costs, delays and supply chain uncertainty. The impact on trade flows, and further potential barriers to trade resulting from the full phasing in of UK checks and controls on imports over the coming year remains uncertain. Enterprise Ireland's Brexit team continues to actively engage with companies to understand their needs and to further develop information and events to respond to them.
As previously mentioned, Enterprise Ireland clients use the scaling opportunities within the UK as a platform to diversify their global footprint into the eurozone. For Irish companies, diversification of their global footprint increases their resilience to market shocks. To support Irish companies to diversify markets beyond the UK, Enterprise Ireland developed its eurozone strategy in 2017 to grow exports into this region by 50% by 2020.
Through the agency’s six offices in the eurozone, including the Munich and Lyon offices, which opened in 2019, Enterprise Ireland’s team is actively connecting with buyers in the marketplace and linking them to Irish companies in these sectors. By 2019, client exports to the eurozone had grown to €5.6 billion, up from €4.1 billion in 2015, making this region the second largest market by value for Enterprise Ireland clients.
Enterprise Ireland clients are optimistic about future market opportunities in the UK market. Irish enterprise has proved many times over in every corner of the world its flexibility, innovative capability and resilience and will find a way through to recover and grow. The UK market will continue to be a key part of this.
The introduction of regulatory and customs checks arising from the changed trading relationship with the UK brings additional costs for Irish exporters, many of whom are operating in low margin sectors. It is very important, therefore, that companies have a renewed focus, supported by Enterprise Ireland, on improving competitiveness across all aspects of their business.
The agency’s message to companies in respect of the new trading relationship with the UK remains the same: act now, get informed, get support and take decisions, both in the immediate and longer term, to maximise opportunities and manage the challenges presented by the changed trading relationships. Enterprise Ireland will assist companies on this journey by driving innovation, competitiveness and internationalisation.
I welcome any questions and would like to thank the committee for the opportunity to address it this afternoon.