Brexit Mitigation Strategies for Irish Exporters
The strong export ties between the United Kingdom and Ireland have been a major economic driver for both countries. Not only is the United Kingdom one of the biggest export partners of Ireland – buying a total of €15 billion worth of goods in 2016 plus 50% of the country’s exported beef and 42% of its food and drink – but UK is Ireland’s only land border in EU, and vice versa. In fact, some 80% of the Irish road freight that reaches mainland Europe passes through the UK.
Those factors alone make UK-Irish trade a unique relationship. However, looming Brexit looming, there are critical border issues and challenges that are expected to disrupt this trading relationship and force Irish exporters to rethink their supply chain operations.
Yet, despite the potential supply chain upheaval Brexit could cause, a large majority of Irish export companies are yet to develop mitigation strategies. According to reports, two-thirds of Irish exporters are still unprepared for the impending withdrawal of the UK from EU and have not put any countermeasures in place to mitigate Brexit risks. Of these companies, 23% said the lack of information on alternative markets to the UK as the main obstacle to identifying and establishing a foothold in new markets.
That said, while the consequences of Brexit for Ireland’s export industry is still a murky topic to dwell in, there are a few strategies that Irish exporters can use to address the supply chain and market risks resulting from stricter border and customs controls.
Export Market Diversification
Brexit could cause an economic slowdown in the UK, which could directly affect the demand for Irish goods and service. Therefore, it is now imperative for highly UK-reliant Irish exporters to implement an export diversification to expand the market base of their goods and services.
Fortunately for Irish exporters, there is a diverse need for Irish products and services across the globe. For instance, Irish exporters can look for opportunities in Latin America markets to boost the demand for their goods and services. As an emerging economic hub, Latin America has a lot of exporting opportunities for Irish companies.
Fortunately, the Irish and Latin Americans have a deep affinity for each other, as many Irish people have played vital roles in social and political events in the region over the past few hundred years. Additionally, its close proximity to the UK is also a good thing for many Irish exporters who want to emulate that kind of relationship and success in Latin America.
However, the key to successful export diversification starts with market research. Having a deep insight into the demand of the product overseas and the innovations that have to be made to become more appealing to a different set of consumer habits and needs are critical in establishing a strong foothold in any new market.
Venture into Eastern Europe
Irish exporters can mitigate the potential loss in the UK market by venturing into markets in Eastern Europe countries. Eastern Europe is a region comprising of some 14 sovereign nations, many of them full members of the European Union and the Single Market with a population of 115 million and a combined GDP of over $1.4 trillion and growing.
Eastern Europe provides a world of opportunities for Irish exporters. Markets in this region are easily accessible with excellent transport routes, and EU-member countries in Eastern Europe have no customs restrictions for the vast majority of goods from Ireland.
Poland is by far the largest country in the region, both demographically and economically. With a GDP of over half a trillion dollars, Poland has a diverse economic environment that offers many opportunities for Irish exporters in sectors such as food, technology, infrastructure and business services. Together with the Czech Republic and Slovakia, it forms a highly developed and compact geographical sub-region with a market of nearly 55 million people and an economy with a combined GDP of $795 billion. All three countries are members of the EU single market.
Obtain Authorised Economic Operator (AEO) Certification
In order to fully maximise the export opportunities in EU countries in the east, it is advisable for Irish exporters to obtain the so-called Authorised Economic Operator (AEO) certification. AEO certification is an internationally recognised quality mark for companies whose customs procedures are in compliance with customs rules and standards set by EU.
Irish exporters who can successfully obtain AEO certification can enjoy a plethora of advantages which will help them operate more effectively and cost-efficiently overseas, including low-security risk; customs simplifications; very low examination rates; priority clearance of goods; and significant financial savings on various customs bonds.
Consider Alternative Routes
A large portion of Ireland’s road freight intended for mainland Europe market and further east markets passes through the UK. Post-Brexit, new tariff rules, and customs checkpoint could be put in place along the Ireland-UK border both of which could add to transit times and transport costs of Irish exporters.
Currently, there are several alternative routes that supply chain experts and international trade leaders could use. These routes include:
- Dublin Port – French Port of Cherbourg
Direct ferries running from Ireland to France and back almost occur daily, which makes this route a logical option for Irish companies to send their freight through, as it is a direct and hassle-free route to mainland Europe
- Dublin Port – Belgian Port of Zeebrugge
Port of Zeebrugge is one of the major EU ports that will be severely affected by Brexit since 45% of its trade traffic comes from the U.K. However, port chief executive Joachim Coens remains optimistic about the future of the port.
- Dublin Port – Dutch Port of Rotterdam
A direct sea route from Dublin to Rotterdam would be an ideal route that would put freight on the doorstep of Northern Europe, with many European trading partners easily accessible from that area.
- Port of Cork City – Spanish Port of Santander
Spain is also a major trading partner for Ireland, and potential routes from Ireland to cities such as Santander would be of significant benefit to post-Brexit Irish companies.
While these alternative routes are not guaranteed to offer shorter transit times for Irish exporters, they would help them to optimize their delivery schedule, rethink their packaging to prolong the lifespan of their products, and possibly encourage them to fully commit in export diversification by establishing additional warehouse facilities in Continental Europe.
Conduct a Supply Chain Audit
Last but definitely not the least, Irish exporters should audit their supply chain from end to end to uncover any hidden strategic suppliers and partners who may be able to help them develop leverage in the overseas market.
Another reason to conduct supply chain audit before Brexit becomes a reality is to gain a full picture of the pressures not only the exporters are under, but the economic pressures their customers and suppliers are under as well. Having such an insight will enable them to anticipate potential Brexit-caused problems before they occur and create more robust contracts.
The uncertainties and challenges that Brexit brings to Ireland’s export industry can either be treated as threats or as opportunities to transform your operations and supply chain networks for a more efficient and competitive business. By taking advantage of these strategies, you will be able to mitigate the turbulence the Brexit could cause your export operations.
To learn how we at Alba Consulting can help you to formulate and implement strategies to bring your business onto the global stage, contact us today at +353 1 415 1252 or email us at email@example.com