Businesses ‘on the hop’ due to Brexit
The latest quarterly Business Monitor Report (April – June 2016) illustrates that the outcome of the EU referendum has caught a large majority of businesses on the hop with 96% of companies in Northern Ireland and 97% in the Republic of Ireland having no plan in place to deal with the consequences of a ‘leave’ vote.
There is a marked variation in the perceived impact of Brexit on cross-border trade by companies in Northern Ireland and their counterparts in the Republic of Ireland. While a quarter of businesses (25%) in the north felt that cross-border sales would decrease, more than twice as many Irish firms felt they would be negatively impacted (57%).
The hospitality industry is anticipating a sharp decline in cross-border sales with 4 out of 5 (84%) companies expecting a downturn compared to around half of those in the manufacturing (49%), construction (52%) and servicing sectors (52%). Retail is the most positive sector, with 15% expecting an impact, perhaps due to exchange rate volatility. When broken down by size of company, almost half of small companies (46%) anticipate a decrease in sales compared to a third of large (33%) and medium (36%) firms.
The negative implications of a higher degree of uncertainty in the marketplace, due to the leave vote, are reflected in that one in five (21%) Northern Ireland firms report that they plan to decrease their level or speed of investment.
This quarter, the issues which have increased most in importance to businesses are exchange rates (up 14%), along with energy costs (up 8%), overhead costs (increased by 3%), a lack of skills (up 8%) and difficulty recruiting skills (increased by 10%). Other issues, including cash flow, new competitors and access to finance, remain important to many firms but are less critical this quarter when compared to quarter one, which may be a first sign of the changing economic landscape post-referendum.
Links to Europe
Regarding new relationships with the EU in the future, around two thirds (62%) of NI businesses wish to retain access to the single market and the free movement of people.
Trading adjustments will need to be made
Clearly businesses will need support to adjust to any new trading relationships that emerge from Brexit negotiations. In the short term, whilst companies will still trade under the same rules and regulations, InterTradeIreland encourages organisations to hedge any exposure their business may have to volatile movements in the Sterling / Euro exchange rate.
InterTradeIreland will support businesses
InterTradeIreland will stay on the pulse of business needs and challenges through our Business Monitor so that we are in a position to respond quickly to business concerns and, if necessary, will adjust our supports as new trading rules and regulations emerge. Businesses, particularly small and medium sized enterprises, should continue to exploit the cross-border market, taking a planned approach to export development or supply chain management.
Positive Q2 overall performance
In terms of wider business performance the picture remains generally positive. In Quarter 2, 86% of businesses in Northern Ireland report that they were stable or growing compared to 93% in Ireland. This differential between the two jurisdictions has increased from 5% in quarter one to 7% this quarter. There is also a more positive business position visible when comparing firms which take part in cross-border trade (where 48% are in slight, moderate or rapid growth mode), to only a third in growth mode who are not participating in trading outside their own jurisdiction.
Uncertainty but strong ambition to grow
We may see uncertainty continuing in forthcoming quarters while companies adjust to changing realities. However, it is encouraging that almost two thirds (65%) of businesses on the island state that they have ambition to grow in the immediate future. Resilience in the face of any adversity remains high and this can be seen across each of the sectors.
About InterTradeIreland’s Business Monitor
InterTradeIreland’s quarterly Business Monitor survey is the largest and most comprehensive business survey on the island and is based on the views of more than 750 business managers across Northern Ireland and Ireland. Surveying for Q2 2016 began on 27 June 2016, the week after the referendum result.
For more information on InterTradeIreland and its business support programmes, please visit www.intertradeireland.com. A copy of the 2016 Q2 InterTradeIreland Business Monitor Executive Summary can be viewed here.