Brexit – What’s the worst that can happen..?

Brexit – What’s the worst that can happen..?

On June 23, voters in Northern Ireland and the rest of the UK will go to the polls to decide directly whether the UK should remain part of the European Union. The result is far from a foregone conclusion and the likely effects of withdrawal are a topic of conjecture. But how do Irish retailers and business people view the possibility of such radical change?

The final outcome of the much-anticipated referendum on the UK’s membership of the EU –a ‘Brexit’ as it’s come to be known – is far from certain.

With less than a month left until the country goes to the polls, both sides in this fractious debate could still be within striking distance of a victory, although at the start of June, bookies in the UK were diverging sharply from the results of many recent opinion polls.

In Northern Ireland – the only part of the UK to share a land border with another EU region – the ongoing debate has centred less on issues such as immigration and national sovereignty and more on pressing economic factors such as the impact on cross-border trade and the likely arrangements for customs and security along the border itself should the relationship between the two jurisdictions on the island change.

It’s fair to say that from a business perspective, there seem to be few on either side of the border who would welcome a Brexit. A recent survey, carried out by Dublin Chamber of Commerce, indicated that as many as 47 per cent of Irish businesses believe that the UK’s departure from the EU would harm their trade. Only one-in-20 of those polled felt that such a move would have any positive consequences.

In the north, only 11 per cent of the Northern Ireland Chamber backed a Brexit in a recent survey – compared to 30 per cent in the rest of the UK.

“For business people, this is a question of in or out,” said NI Chamber president, Stephen McCully. “Those within Northern Ireland who are firmly wedded to the EU have said that Brexit will leave us stranded outside the EU and coping with the re-emergence of a land border with the Republic of Ireland.”

Economic sense

glyn roberts
Glyn Roberts: Economic sense

Glyn Roberts, who represents the NI Independent Retail Trade Association, says that being in the EU means that his members’ customers can benefit from greater choice and lower prices without the additional cost at the till that import charges would bring:

“In our alternative Programme for Government – The Plan – we’re very clear that the UK remaining in a reformed, refocused and competitive European Union makes sound economic sense for Northern Ireland,” he told IFCR recently.

“Being part of the largest single market in a world of over 500 million is crucial when it comes to Northern Ireland growing our private sector. The uncertainty of Brexit is the very last thing that Northern Ireland’s retail sector needs at this time.”

That thinking was also evident in a survey undertaken by the Federation of Small Businesses in the autumn, when 50 per cent of those questioned from across Northern Ireland felt that leaving the EU would have a negative impact. Just 12.5 per cent of those in the survey said that they felt that staying in would adversely affect their trade.

Northern Ireland’s First Minister, Arlene Foster, is a staunch opponent of European integration. She believes that by leaving the EU, Northern Ireland will be able to thrive as “an open economy” with a “global outlook”.

But in the border community of Derry, just across the border from Co. Donegal in the Republic, more than 80 per cent of the local chamber of commerce opposes the idea of a Brexit. Many there can easily remember the demarcated border that existed between the 1920s and the 1970s – and the customs and security checks that went with it.

If that border re-emerges, even the simplest of local transactions – many of which take place across the border on a daily basis – might be subject to additional charges, at least until a post-Brexit UK is able to secure some form of free trade arrangement.

Competition

It’s true that since the advent of the EU’s more open trading arrangements, the market share of indigenous retail chains in Ireland has declined. At the same time, the arrival of competitors from other European countries has added variety to the market and driven down prices for consumers at the till.

How would that change in the event of a Brexit? Well, it’s likely that EU customs controls would have to be implemented on everything that moves across the border. In effect, we would return to a situation similar to that which existed before the UK entered the Common Market in 1973. Duty payable would depend on where the products were originally produced and checking could be an involved and lengthy process.

For many retailers, the time constraints and additional expense of this new system could make their current retail models unsustainable.

chris martin
Chris Martin: Complexities

Chris Martin, chief executive of Cork-based retail group, Musgrave, which includes the SuperValu, Centra and Daybreak chains, said recently that the main challenge facing the business was the possibility of a Brexit.

“Without getting into the complexities of Brexit, the challenge is that if the UK votes to leave then we have internal issues of exchange rate management and so on, but the broader challenge is going to be about consumer confidence,” he said.

A lot of branded product sold via Musgrave convenience chains originates in the UK and while Mr Martin accepts that it’s hard to predict accurately what will happen in the event of a vote for Brexit, a weakening pound could spark a renewed exodus of shoppers from the Republic into Northern Ireland.

“We’ve been here before when the exchange rates were close [2009] and we had to renegotiate,” he added. “We saw all the cross-border activity and some of that may re-emerge.”

He believes that the big question now centres on the impact of a British vote to leave in areas such as tourism, finance and consumer confidence at the tills.

Ultimately, it’s difficult to quantify what might actually happen in Ireland in the event of a British withdrawal from Europe. The UK and Irish markets – and those on either side of the Irish border – are highly dependent on one another, and given the amount of trade that constantly flows between those regions, it’s inconceivable that Ireland would escape the resulting shockwaves should the UK vote to leave the EU behind on June 23.

 

Border traders concerned over Brexit

tara buckley
Tara Buckley: Concern

While convenience retailers in the Irish border areas are understandably focused primarily on managing their businesses on a daily basis, Tara Buckley from the Retail, Grocery Dairy and Allied Trades Association confirms that there is a level of concern over the Brexit issue among members

“The main concern is the impact of a change in the value of sterling and the impact that will have on shoppers,” she told IF&CR. “Previous experience has shown them that this can have a significant impact in a very short space of time. One supermarket owner said his sales dropped €15,000 per week the last time there was a significant differential in the sterling/euro rates. That scale of loss is not sustainable for an independent shop.”

Tara also confirmed that independent retailers were concerned about the impact that a Brexit could have on the border with Northern Ireland and how issues such as VAT, travelling to and from the north and trade with Northern Ireland and the UK would be impacted:

“RGDATA members with forecourts are also concerned about the impact on the fuel trade,” she added. “They already have a significant problem with illegal fuel in the border areas and are concerned that a Brexit would exacerbate this.”