Mr. Simon McKeever:

I thank the Chairman and the members of the joint committee for inviting us to talk here today. I would like to refer briefly to four issues. First, I will share some of the statistics we have. We have done a number of surveys. We did one before the vote and we closed another one a couple of weeks after the vote. We are about to go out with another one in a week or so. Second, I will speak about the anecdotal evidence we are picking up. The comments of the previous speakers have confirmed much of what we are hearing anecdotally. Third, I will set out what we are recommending. Fourth, I will discuss an initiative for action we are pursuing. I think it might address certain issues.

I would like to focus on some of the headline statistics in our presentation. Some 92% of our members are saying that Brexit will have a harmful effect on Irish exporters. Some of 89% of our members are doing business with the UK. Some 82% of those who are exporting to the UK are doing business in England. I remind the committee that these results go back a couple of months. When we asked our members whether they were planning to decrease or increase their level of trade with the UK over the following six months, 31% of them said they were planning to increase it. Those results might be a little different when we undertake another survey in the coming weeks. We also found that the weakened value of sterling has had an impact on 65% of the businesses surveyed.

When we did this survey in March - I think that was the first time we did it - we found that 68% of our members were pretty much unhedged at that stage. That figure dropped to 49% within two weeks of the vote. When we spoke to many of the banks the morning after the vote, they told us that much of the coverage was out until the first quarter of next year. The committee needs to be aware that a lot of cover on sterling comes off in the first three months of 2017 and, as a result, we will probably head into a perfect storm at that time. Our members' single biggest concern is currency instability. They are also worried about the introduction of Border controls, the impact on economic growth, customs procedures, dual regulation and the reintroduction of tariffs. It is not just the tariffs that would affect the physical trade but it is also the time delay and the need for companies to employ people with the skills to fill out the paperwork. Someone mentioned to me that the return of borders would increase the cost of doing business by 14%. I should mention in that context that our organisation does not believe the British Government's view on immigration is reconcilable with the existence of a soft Border with Northern Ireland. We believe those two positions are irreconcilable at the moment.

When we asked our members whether they were planning to invest more in Ireland, 19% of them said they would increase their investment in Ireland and 11% of them said they would decrease such investment.

On whether companies plan to increase or decrease employment, the split is even. On the level of pain experienced because of fluctuations in the currency exchange rate, it is the big issue for companies, but in the longer term the big issue will be competitiveness. The first point at which there is pain for a lot of companies is 85 pence sterling, with 90 pence being the next point. As we are now in that zone, the point of pain is a big issue. We have completed an exercise, a copy of which is included in the presentation, on the correlation of movements in the exchange rate with exports to the United Kingdom. They are correlated with each other. Exports to the United Kingdom dropped during the first eight months of the year.

We asked companies if they were planning to consider different markets as a result of the vote. In response 54% replied "Yes". The main markets they are considering are the USA, Germany and France. There is a lot of talk about and interest in the German and US markets. We need to be cognisant of the fact that it is a lot easier to do business in the United Kingdom than it is in any other country in the world. That is why so many of our exports are to the United Kingdom. Anecdotally, what we are hearing is that the immediate impact has been on the exchange rate, with which, as I said, companies are currently struggling.

Companies are also examining their sources of supply. If they find they can purchase raw material cheaper in the United Kingdom than here, they are switching their source of supply.

The next piece is sub-supply. I think this is going to have a huge effect in rural Ireland. We have visited companies around the country and know, for example, that there are a number of businesses with a couple of hundred jobs that are using widgets made by a company down the road that maybe has ten or 20 jobs. These businesses can now can have the widgets made cheaper in the United Kingdom. This will impact considerably on local SMEs. It is not only those who are exporting but the entire supply chain that is being affected.

Earlier one of the IBEC representatives spoke about Irish companies examining whether they might shift some of their production or services to the United Kingdom. That is an issue on which we have also been picking up since February. There is a more positive tax system in the United Kingdom where it is cheaper to find employees. The support the British Government provides in unemployment black spots and so on is generous.

Without going into our recommendations in detail, the immediate recommendation concerns what can be done in dealing with currency and cash flow lending issues. Reference was made to a fund that was available in 2008-09. If it is reintroduced, we will need to ensure funds will be available to all Irish businesses, not just companies supported by the Irish agencies. That is a big issue, as is cash flow lending. In our pre-budget submission we called for a national hedging plan. We have since been told that it would breach state aid rules, but it might be an easier way to try to help companies. We felt the NTMA could manage the risk and that the SBCI and the national banks could farm out the money.

The next piece is much more detailed and deals with cost competitiveness issues and others relevant to the National Competitiveness Council and whether we are living up to our potential in this regard. The longer term picture involves how competitive we will be with other countries. On Brexit, there is no magic bullet. It has been suggested we seek to export to markets in Japan, China and other places and although it will be more difficult to export to these markets than the United Kingdom, we need to start to build a long-term ability.

How we spend our resources overseas is another issue that needs to be examined. It is quite expensive to send public servants overseas in terms of housing provision and educating children. Working with local partners is another way to go. There are organisations in China which will give companies and governments greater access to local expertise. That needs to be done. We have in place a public-private initiative known as the national export hub, in which the Department of Foreign Affairs and Trade, InterTradeIreland and some local enterprise offices are involved. On the commercial side, companies such as ABP, AIB, DHL and PwC are involved. Two years ago, in conjunction with Enterprise Ireland, we travelled all around the country and engaged with approximately 800 people on the issue of export competence. We have since taught 20 companies how to export. The difference between what we are doing and what other State-run organisations are doing is that the training we provide is delivered by the commercial partners involved. Rather than have a consultant speak to companies about how they should go about borrowing money, AIB is engaging with them on what they need to do if they need to borrow money. DHL is teaching them about logistics. It is a live initiative which, as I said, includes some Government involvement and support from commercial partners. We could do a lot more with it if it was funded because we use the funding available to employ people to help companies. Through the national export hub and the Department of Foreign Affairs and Trade we are connecting companies with, say, ambassadors overseas. We are connecting companies through our network all over the world and helping them to grow. I wanted to ensure everybody was aware of this initiative. As I said, there is Government involvement, although to a limited extent, but it is an initiative on which we could build.