It may have been a portent. Shortly before three Ministers were due at the RDS on Wednesday to reassure businesses that there is a plan for a no-deal Brexit, two large backdrop posters promoting the State's Brexit efforts toppled over near the mics.
Had it happened a few minutes later, the posters would have clattered the heads of Tánaiste Simon Coveney, Minister for Enterprise Heather Humphreys, and Helen McEntee, the Minister of State for Europe, as they suggested that a no-deal Brexit is something for which you can prepare with an Enterprise Ireland checklist.
As it was, Humphreys’ bullish enthusiasm was raising the question of whether she had taken a bang to the head already. She gamely tried to convince us that preparing for Brexit just means addressing a few “easy things to do” for small businesses.
“Check your supply chain, check your customs... One hour will do a lot of work [to] satisfy yourself that you have put the necessary plans in place to meet the challenge of Brexit,” she said. “And when you do that, you’ll know the job is done and you don’t have to be distracted by all the events taking place across the water.”
Humphreys was simply doing the job of a Government Minister, which is to keep calm and tell people to carry on. But she knows perfectly well that if Britain crashes out of the European Union on October 31st without an exit deal, all the EI checklists in the world won’t make a difference to the preparedness of most Irish businesses. Not when there’s a one-week delay on raw materials coming in over the UK land bridge and food exports are going rotten in the queues at Rosslare port.
Inflate your lifejacket
Watching Government Ministers calmly telling businesses how to “prepare” for a no-deal Brexit feels like taxiing to the runway while cabin crew demonstrate an aircraft’s safety procedures. You can inflate the lifejacket through the straw or draw attention to yourself using the whistle provided. But if this plane actually does go down, chances are you won’t know much about it because you’ll probably be dead. Prepare for that.
Multinationals and the largest, most regulated businesses such as banks and pharma plants will always have the resources to find a way to cope with the effects of no deal. But for most other companies directly affected – hauliers, small exporters, food or tourism businesses – a no-deal Brexit is more than just some obstacle that could make things awkward for a few weeks. It is a wrecking ball.
How can you prepare to meet a wrecking ball, or a hurricane, or some other disaster, unless you down tools and flee out of its way altogether?
Just one in 10 businesses are preparing for no-deal, the cross-Border trade body, InterTradeIreland, warned last month. Even among those who do business across the Border, fewer than 20 per cent are preparing for a crash-out, even though most identify it as a huge risk to their operations.
A recent survey for KPMG by Red C showed that only about 17 per cent of Irish SMEs have fully analysed their business for the impact of Brexit, including a no-deal. About 60 per cent have prepared a few things "here and there".
Crash-out scenario
But apart from maybe registering for an importer/exporter number from Revenue or assembling the paperwork for a State grant, what else can they do?
There are good reasons why many smaller companies have not yet significantly prepared for a crash-out scenario. It is very expensive to make such preparations and there is a fair chance no-deal won’t happen anyway, so the preparation costs would be sunken. Many businesses cannot afford to absorb the extra costs and so must take their chances, and hope the British political system sorts itself out.
A survey yesterday of companies attending the EI international markets week event in the RDS showed that one in 10 estimated their Brexit preparations have already cost them €100,000 or above. One in 20 said it has cost them more than €250,000 to date. How many businesses can afford to spend that sort of cash on preparing for Brexit when they have no idea what the circumstances of it will look like? How many should spend it?
It is still possible that there may be either some form of customs alignment, or a long transition period ahead of a UK-Europe trade deal, and so nothing changes. How many could afford to write off those costs if no-deal is avoided?
Despite all of the “distractions across the water”, Goldman Sachs still only puts the chances of a no-deal Brexit happening at about one-in-four. That is enough to make it feel like squeaky bum time. But those are still long odds upon which to risk preparations that may turn your business model upside down by, for example, building a new supply chain or pivoting away from the UK market completely.
For some businesses, there isn’t much to do to prepare for no-deal Brexit beyond a few bits of paperwork. Just brace for impact. That’s about the gist of it.
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FOOTNOTE
- The IFA is holding a meeting this week at the docklands offices of Matheson.
No, farmers are not planning to drive sheep through its lobbies in protest at the legal industry's lucrative role in advising corporate tax avoiders. The International Fiscal Association, the global talking shop for tax practitioners, is holding a meeting of its US and Irish branches in the headquarters of the Dublin law firm, which is prominent among Irish firms serving the tax-ruthless global finance industry.
The meeting, which started on Thursday and ends on Friday, sees several officials from Irish and the US finance authorities rub shoulders with the specialist lawyers and accountants whose clients pay them to keep a lid on tax bills. It seems akin to the hunters and the hunted meeting for lunch.
Brendan Crowley, a principal tax officer in the Department of Finance, was on Thursday due to take part in a panel discussion on transfer pricing reforms. Due to join him were a US lawyer from a firm that defends businesses in state tax cases, as well as tax advisers from Irish firms who advise clients on how to lower tax bills.
On Friday, Áine Hollingsworth, one of the most senior officials in the Revenue, is also due to share a stage with tax advisers from the same US law firm, and others from Dublin.
Hollingsworth knows Matheson well. Back in 2016, when The Irish Times was regularly writing stories about the firm’s then-use of a children’s charity in designing tax-efficient fund structures, the Revenue official wrote a memo to her colleagues wondering if the State should “allow that sort of set-up” and was it “proper”. Matheson eventually stopped using the charity for its client.
