Thousands of jobs are at risk in Ireland's food and drink sector if the Government fails to introduce measures to mitigate the impact of the UK's vote to leave the European Union, an industry body has warned.
Food and Drink Industry Ireland (FDII), which is affiliated to employers' group Ibec, has published a new report outlining the competitive pressures facing Ireland's largest indigenous sector since the Brexit referendum outcome.
It said it was “crucial that Irish firms don’t lose out” as a result of decisions by UK buyers to review their supply chains in light of the vote and the subsequent fall in the value of sterling.
The currency’s tumble has the effect of making euro-denominated costs less competitive for British businesses, and the UK is the Irish food and drink industry’s largest trading partner.
Budget
FDII’s report urges an “immediate policy response” that it said should include tax reforms in a “Brexit-proofed” Budget 2017, a review of the national agrifood strategy FoodWise 2025 and the reintroduction of the Employment Subsidy Scheme.
It also wants the Government to establish a task force led by the Department of the Taoiseach to work to safeguard the sector, and a pot of some €25 million to help companies diversify their businesses and fund product innovation.
An Ibec survey of more than 450 businesses found that food and drink companies were much more worried than most about the downside risks of the Brexit vote, with most expecting the recent exchange rate movements to have a negative impact on their business.
At the moment, €1 trades at about 85 pence. If sterling was to weaken further to the 90-pence mark, this would translate to a drop of more than €700 million in food exports and prompt the loss of about 7,500 jobs in the Irish industry, according to an analysis of historic trends by FDII.
Exports
"Urgent action is now required to protect our vital exports to the UK market, limit damage in the domestic market from imports and address competitive pressures caused by the fall in sterling," said FDII director Paul Kelly.
“A failure to act will compound the pressure on exporters, undermine Ireland’s long-term position in the market and threaten jobs.”
Some 230,000 jobs are linked to the food and drink sector, which had been recovering from the recession, with exports growing by more than 50 per cent since 2009 to reach €10.8 billion in 2015.
Separately, the Restaurants Association of Ireland said the combination of high excise duties and uncertainty over Brexit had created a “perfect storm” for the restaurant trade and tourism market in Ireland.
Sterling
The weak sterling has made it more expensive for British visitors to go on holiday and spend money in the euro zone. This has had a particularly negative impact on consumer spending in Border counties, said the association 's chief executive, Adrian Cummins, with members reporting drops of up to 20 per cent in cross-Border spending in July and August.
The Vintners Federation of Ireland, which represents pubs, said its members were "feeling the pinch too". Padraig Cribben, its chief executive, said Budget 2017 should "compensate for the negative effect of Brexit" on businesses that depend upon the custom of tourists from the UK.
British tourists spent as much as 12 per cent less in pubs in Border counties this summer compared to last year, the federation said.
