Irish SMEs remain optimistic about prospects of a Brexit trade deal – but the alternative might be too much to bear

Blog

By Mark O'Rourke, Managing Director, Ireland

23 Nov 2020

It’s clear that, from the outside looking in, the prospect of a Brexit trade deal being negotiated is under threat. While both the UK and the EU lay the blame at one another’s door, the stark reality is that time to finalise a deal is short, with the current ‘transition period’ due to end on 31 December. If no deal has been reached by then, businesses across the country – particularly those reliant on imports and exports – will be left in the lurch. This has the potential to do severe damage to Ireland’s SME sector, with the danger only eclipsed, for now, by the continuing struggle businesses face in the wake of the Covid-19 pandemic.

Since the first Irish case was reported in February, the business landscape has changed utterly, with many forced to seek out a range of financial supports in order to remain solvent. The Government continues to walk a tightrope between opening up the economy and allowing businesses to trade on the one hand, and on the other implementing the restrictions and safeguards necessary to protect people’s health and wellbeing. The extent of this challenge was laid bare by recent our recent Covid-19 Pulse survey, which found that over half (54%) of SMEs believed social distancing had reduced their ability to take on new business.

But despite the negative reports around the prospects of an EU-UK trade deal, Irish SMEs have remained optimistic – with some 61% believing a deal will ultimately be agreed in time. Certainly it is in these SMEs’ interests that a deal materialises, with 63% believing failure to reach an agreement will have a negative impact on their business.

For many of the 250,000 businesses in this country, 92% of whom employ ten staff or fewer, the absence of a deal will significantly affect supply chains that have already been disrupted by the Covid-19 pandemic. The time taken to receive new goods or raw materials has been stretched, creating knock-on effects even for those businesses that aren’t directly importing or exporting themselves.

The absence of a deal will significantly affect supply chains that have already been disrupted by the Covid-19 pandemic.

However as the Taoiseach Micheál Martin warned earlier this week, “even if we have a deal, the implications for businesses and companies will be significant”. He expressed concern that some firms had fallen into complacency when it came to Brexit, and instead of getting ahead of the requirements, they instead risked falling behind. While there was good news in the development of a third potential vaccine for Covid-19, ultimately businesses must accept that, no matter the outcome of this week’s talks, things will be different and the world “will not be as seamless as it once was.”

Last year the Government encouraged what it termed ‘vulnerable but viable’ businesses to secure emergency loan approval ahead of a possible no-deal UK withdrawal, and earmarked €110m for those businesses. While a no-deal exit for the UK was ultimately avoided, 12 months on and with the transition period about to expire, Irish SMEs will feel a strong sense of déjà vu.

Following Budget 2021, SME owners will have been somewhat comforted at the prospect of further supports to help them keep the wheels of their businesses turning and staff on the books. But it’s clear that, as the public finances come under increasing strain due to the pandemic, this type of Government support cannot last forever.

As the public finances come under increasing strain due to the pandemic, this type of Government support cannot last forever

Overall there are roughly 3,000 wholesale and retail businesses exporting goods to the UK each year, and almost 13,000 businesses in the same sector importing from the UK. Failure to agree a trade deal would have a profound effect on these businesses at a time when the Government would be in a weakened position to offer further support.

SMEs around the country are still reeling from the double whammy of Brexit and Covid-19, and their twin impacts on the sector cannot be overstated. While businesses will likely have to contend with the effects of Covid-19 for some time to come, many have remained optimistic that an agreement between the UK and the EU can be found. For many of them, the alternative may be too difficult to imagine, and SMEs will be keeping one eye on the ongoing negotiations in Brussels while they continue to juggle Covid-19 requirements at home.


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