A hard Brexit remains a major threat to the Irish food sector, despite ongoing efforts of food exporters to diversify shipments away from Britain.
- The agri-food and beverages sector accounts for 7.6% of Ireland’s economy, 10.7% of its exports and 8.4% of total employment. Ireland continues to be the largest net exporter of dairy ingredients, beef and lamb in the EU. Food exports increased 2% in 2016.
- Despite a decrease compared to 2015 (41% share), with a 37% share the United Kingdom was still the largest destination for Irish exports in 2016, while other EU countries accounted for 32%, up 3% year-on-year.
- Irish food exporters to the UK have suffered shrinking margins due to the pound sterling depreciation in the wake of the June 2016 Brexit decision. It is estimated that the weak British currency reduced the value of Irish food exports by about EUR 570 million in 2016 alone. The deterioration of businesses margins is expected to continue in 2018.
- A hard Brexit remains a major threat to the sector, despite ongoing efforts of food exporters to diversify shipments away from Britain. Any future imposition of tariffs by the British government on food imports from the EU after leaving could be devastating for the Irish food sector (e.g. exports of cheddar cheese to the UK, valued at overEUR 300 million, would face a 55% tariff).
- In order to counteract the threat of tariffs in the event of a hard Brexit, Irish companies have been buying companies in the United Kingdom. This should give them continued access to the British market after 2019.
- Payment behaviour in the sector has been very good over the past 12 months, and the number of protracted payments, non-payments and insolvency cases is still very low. Therfore, our sector performance assessment still remains “good” for the time being. However, as the Irish food sector will remain exposed to currency volatility and growing risks in relation to the decision of the United Kingdom to leave the EU, we expect both payment delays and insolvencies to increase in 2018.