Mr. Arnold Dillon:

Thank you Chairman. I thank the committee for the opportunity to set out some of the views and concerns of business on this crucial issue. As members know, IBEC is the country’s largest business organisation and the voice of Irish business on a domestic, European and international level. We are working to support member companies right across the country and in all sectors as they manage the immediate currency shock and plan for the potential significant disruption that Brexit could bring to existing trading relationships.

Many individual businesses have been slow to talk publicly but the feedback from our members is clear and unambiguous. Businesses are under threat and jobs have already been lost. While companies are moving quickly to manage severe competitive pressures, an urgent, targeted national response is also required. The exporting industries most affected by the sterling fall are typically jobs-intensive and deeply embedded in local economies. This adds to the risk that some parts of the country will be disproportionately hit. A review of the historical exchange rate and agrifood exports, for example, shows that a 1% weakness in sterling results in a 0.7% drop in Irish exports to the UK. This has already begun. Our most recent trade figures for the year to August showed the value of Irish food exports to the UK fell by 8.1% annually. This represents an 18 percentage point downturn on the 10% growth in value recorded in 2015. This fall accelerated to 14.5% annually in the two months since the referendum and has hit all categories. If sterling stays at the £0.90 mark to the euro for a protracted period, which is quite likely, this is likely to translate into losses of over €700 million in food exports and potentially about 7,500 Irish jobs. The retail sector is also particularly exposed as we approach the crucial Christmas trading period. Currency movements have significantly increased the attractiveness of shopping in the North or with UK online retailers, thus depriving domestic retailers of important business.

In the brief time I have today, I want to outline some practical steps we need to take domestically to protect and advance Irish interests during this period of great uncertainty. In the first instance, we need to focus on areas that are within our control. Budget 2017 introduced some welcome measures to address the competitiveness challenge of Brexit but a more comprehensive policy response is now required. IBEC will be setting out key domestic policy priorities for the Government over the coming days. First, it is vital that greater efforts are made to help viable companies to come through the Brexit transition, retain UK market share and diversify. This could run up against state aid obstacles in the short term but Ireland will need to make sure its special case is heard. Second, an intense focus on cost competitiveness is required. As sterling drops and competitive pressures increase we need to be wary of runaway increases in labour costs and take strategic decisions which could avoid increasing already high costs on businesses in areas such as energy, regulation and insurance.

Third, potential trade restrictions post-Brexit and the more preferable tax treatment of small and medium enterprises, SMEs, in the UK raise the possibility of Irish SMEs servicing that market from within the UK itself rather than by exporting from Ireland. As such, the need to level the playing field in the tax offering for indigenous business has never been more urgent. Whereas changes in the budget were welcome, they did not go far enough. As we look to the medium term and some of the opportunities which may come our way, we need to ramp up public investment far beyond current plans and put in place a quality education system, public transport network, housing and public services needed to attract new investment and compete in a post-Brexit world.

Finally, the risks from Brexit will weigh heavily on the regions. If we do not wish inequality of economic activity to expand post-Brexit we will need to address infrastructure deficits in the regions. Key projects need to be expedited. My colleague, Mr. Gerard Brady from the IBEC economics team, is with me today and will be happy to talk through some of these issues in more detail. Early next year, the UK will trigger Article 50 and begin formal exit negotiations. Ireland must play a central, collaborative and constructive role in what is likely to be a fraught process. A hard Brexit, with the imposition of tariffs, restrictive rules on migration and the resulting disruption to trade flows, investment and the regulatory environment, would be deeply damaging to business and economic interests. For this reason it is important to Irish business that the UK retains access to the single market on grounds as close to full membership as possible. We need to support these efforts in negotiations. The political settlement in the North needs to be afforded a special status, along with a continued commitment to the development of the all-island economy. The common travel area between the UK and Ireland must be preserved. Notwithstanding the profound challenges that Brexit presents, it is vital that we sustain and build on the very positive and mutually beneficial relationship we currently enjoy with the UK. I thank the committee for its time and we look forward to answering questions.