Ireland Producers Struggle With Brexit Exports
Published: 21 Nov 2016
Irish food producers are struggling to export their goods to the UK.
The dramatic fall in the value of the pound after the Brexit vote has decimated their profits in euros.
Difficulty with Exports
Plenty of food manufacturers and retailers in the UK may soon be having a lot of trouble with their supply chain, thanks to the dramatic tumble of the pound’s value post-Brexit vote. Some Irish producers are now having to cut their contracts thanks to the euro conversion rates.
The Mr Crumb company offers breadcrumbs and stuffing, produced in Finea. For 10 years, business head Bernard Coyle has been supplying to the UK. Since the referendum, however, he has had to start telling some of his customers that he can no longer work with them.
“My profit has been wiped out,” he says. With euros as his cost base currency, there is nothing he can do short of increasing his rates hugely. It’s tough to pass these prices on, particularly with the consumer in mind. The industry is highly competitive, and those who can do it at a lower price are more likely to get the order.
“There is no prospect of getting a price increase in the short to medium term in these markets, so we are having to bite the bullet,” he says.
Ireland has been hit particularly hard by the changing exchange rates due to the nature of their export industry. The Republic’s biggest industry is food and drink, and the UK is their biggest customer. With €11 billion of exports last year, €4.4 billion of that went to the UK. Now, a large part of that revenue may have to be cut.
Other areas of business are suffering too. “Brexit is causing us to look to invest in Europe much more quickly than we had planned so that we are not too dependent on the UK market,” says Declan O’Connor, BHSL’s managing director. His company transforms chicken droppings into fuel.
Impacts Already Felt
While this has been a period of uncertainty, it has already sounded the death knell for some. A few mushroom farms which exported their products to the UK have gone out of business in the months since the vote. But this might not be the last of the casualties, as the exchange rate continues to be volatile.
The Irish economy is heavily dependent on agriculture, and there are now predictions that it will shrink over the next 10 years compared to how things would have been with an anti-Brexit result.
There are 230,000 food jobs in Ireland, according to Food and Drink Industry Ireland. Moreover, exports have doubled since 2009. That progress is now at risk of disappearing again.
Statistics suggest that every time the pound declined 1% against the euro, Irish food and drink exports fell by 0.7% where the UK was concerned. Now it looks like “significant supply chain restructuring” could start to freeze out the Irish producers, whose prices will become too expensive for UK buyers.
The value of the euro has climbed to almost 90p in recent months. According to the FDII, the risk is that it may go above this level. If it does, it may “translate to losses of over €700m in food exports and about 7,500 Irish jobs”. It is clear that there are going to be some big changes afoot, not least for those companies whose business model is built around UK exports.
“Some will weather this, and others will face a difficult time, there is no doubt about that,” says Padraig Brennan of Bord Bia, the Irish food board.