Mr. Paul Kelly:

I will go through the questions in sequence. Ultimately, any price increase will be a matter for individual companies, so I cannot comment directly on that. What I can say is that even though consumer packs of flour have a relatively long shelf life, the type of flour which is used in industrial processing has a much shorter shelf life. Companies will generally try to use it within around two weeks of it being milled. I just want to give the Chair an idea of the flow of the production process. Also, when that is combined with the silo storage capacity that each of the bakeries have, which generally does not run to much more than a number of days, it can be seen that it is quite an immediate problem for the companies. The impact is being felt by them already. I will make a more general point to which I will return at the end. On the impact from a time perspective, there is a spectrum across the industry, and it is very much determined by the shelf life of the products. Much of the fresh meat and dairy products are impacted literally from day one, whereas for other companies, where they have been able to stockpile because of the longer shelf lives, they will feel the impact in the weeks and months ahead.

On the second point, in respect of regulatory divergence, some very good work has been commissioned by the Department of Enterprise, Trade and Employment from Copenhagen Economics over recent years. There has been some really good analysis of the different Brexit scenarios. It was updated at various stages. One of the scenarios looked at relatively recently - I suppose it would have been last year - was the trade costs under a bare bones FTA, which essentially is what we have. This was then broken down further, and looked at it with no regulatory divergence and with regulatory divergence. They were looking at an increase in trade costs of around 4% to 5% for a FTA with no regulatory divergence, and an increase of approximately 14% for a bare bones FTA with regulatory divergence. What can really be said, considering the pronouncements of the UK in particular, and with the move outside of the Single Market, is that we are talking automatically about regulatory divergence.

Regulatory divergence will happen in two ways. There is the normal, ongoing dynamic of legislative change, and the work that the members, as Senators and legislators, are involved in every day. We can see that, particularly at the European level, where so many pieces of legislation are programmed in terms of the fact that they are due a change for some reason, whether it is a review, a certain number of years have passed, or new pieces of legislation are required to implement particular policies. It is happening on an ongoing basis. In our area alone,for example, we can see very specific changes that are due to happen related to certification for composite products in April 2021. A huge amount of work is going on as part of the farm to fork strategy which will see major changes to labelling over the next two to three years. They are just some specific examples. The UK is also stating that there are some particular areas that it will and wants to diverge on. There are other areas where it will simply look at the new pieces of European legislation being produced and decide that it is not interested in transposing that legislation, as it would have done previously. Therefore, divergence can happen very quickly.

What does that mean for businesses? It means a few things. First, there are additional resources required to keep on top of everything, because now businesses are serving two distinctly different markets from a regulatory perspective. When it comes to things like packaging, it can result in major headaches for businesses, because until now, by virtue of the common language, Ireland and the UK were treated as one market for packaging purposes for many companies. This helped from a scale point of view. If we see changes, as we no doubt will, to labelling requirements, for example, two different production runs will be required. Again, much of the time it comes back to issues like the small market that is geographically distant. Where does a business serve the Irish market from? Does it serve it from the Continent or by running an additional production line in the UK?

All of these things introduce cost and complexity into the market. It is something that we will need to keep a close eye on.

There are more fundamental policy issues around other areas, such as plastics and pesticides. Those are just two examples that come to mind. We may see different approaches being taken by the EU on one side, and the UK on the other. We will need to balance those. They may create unintended consequences in terms of our ability to serve markets or to use ingredients from the other market.

On the question of the impact on businesses, it is really too early to say. Most of our engagement with the members has been around those teething problems and issues, particularly on the import side. Companies are most focused on getting their product into market and meeting their commitments to retailers and food service businesses, where they are open. As I have highlighted in my opening statement, what is important in respect of the issue of the impact on exporters, the big crunch dates will be 1 April and 1 July 2021, when many of the non-tariff barriers that importers are currently facing will start to impact on exporters as well, and those exporting to Britain in particular.

Related to that is the stockpiling issue. Many companies still have stockpiles. Those stockpiles are being run down, particularly for the longer shelf life products. As those stockpiles start to run down and the volumes increase even further for imports, we will see more issues arise for the companies. However, at this particular moment in time, many of the issues are operational in nature, and the companies are very much focused on keeping those supply chains going.

On the Chair's last point in respect of supports for business, as I mentioned in my opening comments, the capital investment programme for primary meat and dairy is welcome. The companies will be working on their applications for that. All the measures really should be predicated on two things. The first is maintaining our market position in Britain. As it stands at the moment, our exports can be divided into three, with roughly one third going to the UK, one third going to the EU-26, and one third going to third countries. The ratios differ depending on whether it concerns meat, dairy, alcohol or prepared consumer foods. We have valuable positions in all three markets, so it is most important that we manage to maintain our UK market position and potentially grow it. However, 90% of our growth in recent years has been in respect of exports to the rest of the EU and to third countries. The measures to both maintain and improve our competitiveness and our ability to produce new products and diversify into those markets, are going to be key.