Tuesday, 14 July 2020

Questions (25)

Bernard Durkan


25. Deputy Bernard J. Durkan asked the Tánaiste and Minister for Business, Enterprise and Innovation his plans to obviate the negative impact of Brexit on the economy here; and if he will make a statement on the matter. [15689/20]

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Oral answers (6 contributions) (Question to Business)

This question seeks to ascertain the extent to which the Government continues to examine the potential impact of Brexit as the year draws to a close.

I thank the Deputy for his question and for his ongoing interest in Brexit and how it will impact on this State. Whatever shape it finally takes, Brexit will have a significant impact on the economy. It will fundamentally change the trading environment for businesses currently trading with the UK. In 2018, my Department published a report, entitled Strategic Implications for Ireland Arising from Changing EU-UK Trading Relations, which examined the implications of Brexit for the economy and trade. While tariffs often spring to mind as a significant cost factor, in fact, the cost of non-tariff barriers due to regulatory divergence and bureaucracy will have a greater impact on businesses trading with Britain.

In January of this year, my Department published a further study on Brexit impacts based on the withdrawal agreement and the revised political declaration agreed between the EU and the UK. The findings suggest a reduction in Irish GDP of between 3.2% and 3.9% by 2030, compared with a baseline whereby the UK remains a member of the EU. This compares with a negative impact of 7% in the no-deal, or WTO rules, scenario modelled in 2018. Of course, both Brexit studies predated Covid-19, which has had a severe impact on the Irish and British economies, with recent forecasts suggesting negative GDP growth of around 10% this year.

The Government has taken extensive action to mitigate the worst effects of Brexit and in each of the last three budgets, provision was made to assist businesses to prepare for Brexit. That provision includes a wide variety of soft and harder enterprise and financial interventions delivered mainly through the enterprise agencies. At entry level, training, mentoring and consultancy advice has been provided, leading to financial assistance by means of vouchers, grants, short-term liquidity loans and longer-term loans to assist businesses to restructure and diversify into new markets beyond Britain. Customs is another area in which we have been actively working on putting in place training programmes, as well as the Clear Customs initiative, which is designed to build sufficient capacity to deal with the new checks, controls and documentation that businesses will need post Brexit.

I thank the Tánaiste for his comprehensive reply. To what degree are he and his Department pursuing the alternative markets that are currently emerging and which might become available, with a view to identifying the best possible options as we proceed? Given that it is in the interests of businesses to keep costs as low as possible, to what extent is the Tánaiste satisfied that we are on the right road and are capable of meeting any challenges we might face?

Diversifying our economy in order that over time, it becomes less and less dependent on trade with Britain is an enormous part of our work, not just in the Department and the Government as a whole but also for the trade section of my Department, Enterprise Ireland and IDA Ireland. If one looks back far enough, Britain was once our only significant trading partner and it now makes up about 17% or 18% of our trade, though that is a misleading figure because it is so important for certain sectors such as the food and drink sector, small manufacturers and many SMEs. While our food sector still exports about 40% of everything we produce to Britain, there was a time when that was 70% or 80%. Much progress has been made in that regard but we need to build on it. As we are part of the eurozone, we need to develop trading links with more eurozone countries. There are huge opportunities in our trade agreement with Canada and more opportunities in America, China and Asia as well. The difficulty is that much of that work has been disrupted in the past few months because of Covid, as IDA Ireland and Enterprise Ireland offices in Asia were closed and no site visits were happening. Much of that work is now being done online but it is not the same and that has been quite disruptive. The good news is that some of the offices in Asia are reopening this week.

In the Tánaiste's experience, has the UK's position softened in any way as we approach the end of the year or has it hardened? To what extent does he expect the UK's attitude to impact on the final analysis of our particular economic situation?

I do not know. I have not had the chance to speak to my new counterpart, Alok Sharma, yet but I intend to do so in the next week or two. Based on the experience I have had with Brexit negotiations up until now, I think there will be a deal but that it will come late in the day, maybe as late as October, November or December. That is why we once again have to prepare for the risk of a Brexit with no trade agreement. We unfortunately have had to march businesses up that hill a few times already but we need to be prepared for it if it happens and we are going to have to step that up again over the next few months. I think there will be an agreement with the UK but whatever that agreement is, it will not include membership of the Single Market so it will be a diminution in the trading relationship and will mean checks and costs for businesses. It will not be good news but hopefully it will be manageable rather than detrimental.