Frequently Asked Questions
How did Irish food and drink exports to the UK perform in 2016?
The share of exports destined for the UK declined in 2016 from 41% to 37%. Exports were 8% lower than the previous year, valued at €4.1 billion. Irish exports were negatively impacted by the uncertainty arising from the Brexit referendum in June 2016, which resulted in fluctuating exchange rates for much of the year. The weaker sterling created additional competitive pressures and this resulted in a decline in value for most categories of food and drink with the exception of seafood. Better returns in other European and international markets also impacted trade.
However, it is estimated that the overall value of Irish food and drink exports increased by 2% to reach €11.15 billion in 2016. Lower trade to the UK triggered by challenging exchange rates and competitive pressures was offset by increased exports to European and international markets such as North America and China.
What does the weakening of Sterling mean for Irish food and drink companies?
The UK’s referendum vote to leave the EU has led to significant uncertainty and a weakening in Sterling. Since the Brexit referendum outcome, the value of Sterling has depreciated approximately 10% against the Euro, and 15% lower since the beginning of 2016 (as of January 2017). The pound stumbled to its weakest ever level against the Euro, at 91.1p on Tuesday October 11th . It also hit a new low against the dollar, depreciating 17% since the referendum and trading to $1.21 at one point.
It is expected that exchange rates will remain volatile as political and economic uncertainties continue for the foreseeable future, in both the UK and Europe. Bank of Ireland has forecast that Euro/Sterling will reach 92p by the end of Q1 2017 and 90p by the end of the year.
Irish food & drink companies that did not hedge against Sterling fluctuations may have their sales margins affected or find increased competition amongst now cheaper British alternatives.
How do Bord Bia plan to support Irish companies exporting to the UK in light of Brexit?
Bord Bia conducted a survey in July 2016 with over 200 exporting companies to understand their concerns and requests for assistance. Informed by this we have implemented a strategy for supporting the Irish food and drink industry through the Brexit process. This focuses on:
Assisting companies to ease Market Volatility Impacts: Over recent months we have organised a series of seminars, workshops and trade events to assist Irish companies to remain competitive in the UK. We have also rolled out a Market Intensification Programme (MIP) grant to provide targeted marketing supports to companies with a high dependency on the UK market. The support assists companies to strengthen their position in that market and in their efforts at market diversification. Grants totalling €655,000 have been approved for 32 companies.
Providing Consumer and Market Insight: We run a number of programmes to help companies develop business in the UK. These programmes have been strengthened and we have doubled our one-to-one mentoring with UK foodservice and retail experts since the referendum result. We are increasing the number of market and consumer insight projects being undertaken by our Thinking House insights
Deepening Customer Engagement: We are enhancing existing trade events and pursuing additional opportunities to promote Irish products in the retail and foodservice environment. We have doubled the number of one-to-one mentoring sessions with client companies in light of Brexit.
Extending Market Reach: We are also continuing to support our client companies through the provision of market and consumer insight and brand guidance, while enhancing our market and trade visits, particularly to emerging markets. This is underlined by the opening of two new offices in 2016 in Warsaw and Singapore.
To discuss the available options for your business please contact your sector manager.
Will some form of bilateral agreement be negotiated between UK & Ireland?
The primary objective of the Irish government is to protect and advance Ireland’s national interests. Under the terms of Article 50 of the Lisbon Treaty, withdrawal negotiations will be concluded between the UK government and the EU by the European Council, acting by a qualified majority, after obtaining the consent of the European Parliament.
The scope for potential bilateral arrangements will emerge in these and subsequent negotiations between the EU and the UK.
However the Irish government has also stated a desire to maintain and build on the strength of the existing bilateral relations with the UK. However in many cases they will have to be managed through EU-UK frameworks.
What are the implications for companies trading with Northern Ireland?
There is no change at the border between Ireland and Northern Ireland. Until the UK formally withdraws from the EU, Northern Ireland will remain a full member and retain all of its existing rights and obligations. Businesses can continue to trade as normal and people can continue to travel as normal between Ireland, Northern Ireland and the rest of the UK.
The Irish government has stated that during any negotiations it would actively seek to avoid the introduction of any new measures that could negatively impact on the Border region, either North or South with Theresa May also noting common travel between the countries as part of her 12 point Brexit plan.
Will tariffs be introduced immediately?
There will be no regulatory changes to Irish or EU goods and services entering the UK until it actually leaves the EU. The triggering of Article 50 of the Lisbon Treaty by the UK government (currently scheduled for end of March 2017) will begin the two year negotiation process for UK withdrawal from the EU, during which time all EU laws continue to apply. Any extension to the two year negotiation period must be unanimously agreed by all EU member states.
What will that tariff system be and when will it be introduced?
It is presently unknown what type of tariff system may be put in place once the UK has withdrawn from the EU; this will be determined by the exit negotiations. The UK are looking to create a new model for their trade with the EU. However, a number of current trade models have also been cited as potential arrangements between the UK and EU, including :
1. European Free Trade Agreement (EFTA) – this would follow the model used by European Economic Area (EEA) countries Norway, Iceland and Lichtenstein
2. EU Free Trade Agreement (EUFTA) plus bilateral treaties on individual single market issues similar to Switzerland
3. Remain in the EU Customs Union – this would allow the trade of goods without border checks or tariffs but would require the UK applying certain EU rules such as common external tariffs with third party countries
4. International Free Trade Agreements – such as CETA with Canada
5. No Free Trade Agreement – this would mean most favoured nations (MFN) tariffs apply to exports from both partners, under World Trade Organisation (WTO) rules
Will there be lots of extra paperwork and costs involved in trading with the UK?
Industry experts have predicted a rise in costs once the UK has left the EU. The UK will become a non-EU country with expected additional regulatory and administrative business transaction costs. Some experts have informally estimated a 5% rise in trade costs between the UK and its trading partners however the final costs will only become clear post the negotiation period .
How quickly will the current terms of trade be dismantled and new structures put in place?
Negotiations for the UK to exit the EU cannot commence until Article 50 of the Lisbon Treaty is invoked, with the UK Prime Minister formally notifying the European Council of the UK’s intention to leave. The media have widely reported that Theresa May plans to invoke Article 50 by the end of March 2017. This may be delayed for a number of reasons, including a High Court hearing which has ruled that any Brexit legislation plans must be approved by the UK parliament .
While it remains to be confirmed, it is likely that negotiations on the UK’s future relationship with the EU, including in terms of trade, would take place in parallel with the exit negotiations. These negotiations are likely to take several years.
Recognising that it will be difficult to reach a full deal on terms of exit from EU within two years, UK politicians and business stakeholders have called for a ‘transition period’ or interim deal between when the UK formally exits the EU and new legal structures are put in place. This would avoid any sudden disruption and mitigate the uncertainty being faced by the public and industry. This transition period may last a number of years.
Will the EU regulations on food products still apply to products exported to the UK?
At present the UK is still part of the EU and therefore there are no changes to existing EU regulations on supplying food products to the UK. The UK will need to trigger Article 50 and then conclude a two year negotiation period before any regulatory changes come into effect.
Will Britain remain a key market for Irish food and drink exports?
Ireland is the main export market for UK food and drink products, accounting for almost one fifth of trade at €3.1 billion in 2015. In turn, the UK imports almost 40% of its food and is the largest single market for Irish food. It accounts for 37% of the total Irish exports, an estimated €4.1 billion in 2016.
Two way trade links between Ireland and the UK are extensive and Bord Bia, through our London office, is maintaining a close dialogue with key trading partners to reassure them of the importance of the UK market to Irish food and drink companies and our continued commitment to the UK market during this period of uncertainty.
What other potential emerging markets should Irish food and drink exporters focus on?
Irish food and drink is sold in more than 180 markets worldwide. Exports to other EU countries formed 32% of total exports or €3.53 billion in 2016 due to the growth of markets such as the Netherlands, Spain, and Poland. Exports to international markets accounted for €3.49 billion or 31% in 2016.
In addition to the support Bord Bia will provide to companies currently exporting to the UK, we will continue our market diversification strategy to broaden the opportunities for Irish companies to export to EU and International markets.
In 2016 Bord Bia opened new offices in Warsaw and Singapore to complement the already existing footprint of 11 offices across the UK, Europe, North America, Middle East and Asia.
Bord Bia is also working with the Department of Agriculture, Food and the Marine on a number of Trade Missions this year with a view to widening the customer base internationally for Irish Food. These activities form part of an existing diversification and new markets strategy.
To discuss the available export options for your business please contact your sector manager .