Mr. Paul Kelly:

The impact has been significant uncertainty, which has made it difficult for businesses to deal with it. It was quite noticeable, particularly for the medium to larger-sized companies, that once they got over the initial shock, they went into project-management and problem-solving mode. It was approached as a significant business problem. The approach taken was to look at in a structured fashion. Initially, this was done on the basis that there would be some form of a withdrawal deal and then a move into the 21-month transition period. Nobody saw this as good for the reasons I outlined earlier, namely, all Brexit outcomes are bad outcomes. Businesses were planning on this basis. As soon as we ran into all the political difficulties around the withdrawal agreement, the level of uncertainty increased dramatically. That caused quite a number of problems for companies in terms of their planning and what they needed to do. The closer they were to market, the more they had to invest large sums of money in terms of stockpiling. Stockpiling brings a whole range of concerns and costs. It means that one must interfere with production efficiencies because one might be bringing people in for extra shifts. There are costs associated with that. Then one has to hire warehousing space and additional working capital is tied up as a result. This happened or is due to happen on several occasions, namely, 29 March, 12 April, 31 October and now, potentially, 31 January. All of this is taking place during some seasonally important parts of the year for different sectors of the industry. Companies have just had to deal with that. In terms of some their long-term planning, it has impaired much investment by businesses. On the other hand, it certainly made many of them begin to work on market diversification. Where the UK was an easy market to work, if that was their sole market, they would have expanded into other markets as well.

We have our own cost competitiveness index that we use to measure the broad cost environment in which companies are operating. We exclude raw materials from that because they are priced generally, regionally or internationally. The second thing we measure is currencies. What we found was that, since 2015, for companies selling into the UK market, their cost competitiveness deteriorated by 30%. Of that, 10% was due to a rising cost base in Ireland caused by a hot economy to put it mildly. The other 20% has been due to the depreciation of sterling. It has come back a little bit but that is what companies have faced. That has had significant impacts back along the supply chain.

Some of our focus in our submission to the committee and in our pre-budget submission has been what can be done to support companies to make them more cost competitive. From the Government, we see various initiatives such as the lean manufacturing scheme. They need to be supplemented by more state aid supports in terms of capital investment in companies to ensure they can bring more efficiencies to the manufacturing processes and lower the cost of production. Over the longer term, there is nothing we can do about currency. We are part of the eurozone and the UK has a different currency. Companies have to deal with that but we want to be able to deal with it from Ireland rather than transferring manufacturing operations to the UK.