Despite record exports in 2019, the dual threat of Covid-19 and Brexit represent critical challenges for Irish businesses in H2 2020.
Exports by indigenous Irish companies reached their highest ever levels in 2019 with sales to the Eurozone and North America reaching €25.9bn, up 8pc on the previous year, according to Enterprise Ireland.
However, all of that was before March of this year when the rise of Covid-19 forced Irish society and the economy into lockdown.
“The July Jobs Stimulus will be far reaching and of scale to get our people back to work and get us back on the road to growth and prosperity”
Now a dual threat of Covid19 and Brexit presents a double-whammy of challenges for Irish businesses in the second half of 2020.
Already the impact of Covid-19 is evident in new contracts won by exporters in 2020.
2019 a record year for Irish exports
In 2019 exports to the Eurozone region saw record growth of 15pc to €5.6bn, while exports to North America increased by 16pc to €4.7bn last year. These performances reflect Enterprise Ireland’s emphasis on the importance of diversifying into new markets as a result of Brexit.
2019 saw the construction sector record significant growth, up 19pc on 2018 to €2.24bn and digital technologies grew by 11pc to €2.41bn. Food grew at a more moderate pace of 3pc to €12.17bn, reflecting an impact from commodity pricing and Brexit uncertainty. The overall dependence on the UK market reduced to 31pc of total exports, down from 42pc ten years ago, a key focus of the Enterprise Ireland diversification strategy.
2019 saw 221,895 people employed in companies supported by Enterprise Ireland. 65pc of these jobs are located outside Dublin.
And then Covid-19 struck
Enterprise Ireland is cautioning that 2020 will be very challenging for many Irish exporters due to Covid-19.
The first half of 2020 paints a different picture to 2019 and Irish companies trading internationally have been impacted in every market due to the global nature of the Covid-19 pandemic.
Covid-19 has had a negative impact on order books and international market confidence. New contracts won by Enterprise Ireland-backed companies declined by 12% in the first half of 2020.
Enterprise Ireland said that approximately 1,000 client companies are impacted by Covid-19 and that there are 300 companies who are very exposed to Covid-19 and also have high levels of exports to the UK.
Of these 1,000 companies 75pc reported that their exports have been impacted by Covid-19 and more than half saw a negative impact on cashflows.
And Brexit hasn’t gone away either
The agency has warned that the impact on exporters for the latter half of 2020 will be very challenging and that they face the dual challenge of both dealing with the Covid-19 impact on their business and also the impending 1 January Brexit deadline.
“Before the onset of the Covid-19 pandemic, Enterprise Ireland backed companies had already faced challenging circumstances due to the uncertainty caused by Brexit,” Tánaiste and Minister for Enterprise, Trade and Employment, Leo Varadkar, TD, said.
“Despite this, Irish exporters had a really strong year in 2019, with record levels of growth.
“We have already put in place a range of measures to help businesses get through the unprecedented difficulties caused by Covid-19, including grants, low cost loans and deferred tax liabilities. We know we need to do more as our economy continues to reopen. The July Jobs Stimulus will be far reaching and of scale to get our people back to work and get us back on the road to growth and prosperity.”
Priorities: Diversification, business models and climate action
Julie Sinnamon, CEO of Enterprise Ireland, said that the agency’s priorities for the second half of 2020 include preparing Irish firms for the impact of Brexit by helping them to accelerate diversification into the Eurozone and ensuring they are prepared in terms of funding, innovation and competitiveness.
“Not only have many businesses been impacted by a significant reduction in customer demand from markets across the world due to Covid-19, but they are also facing the largest structural change to trading with the UK in over 50 years”
Its priorities also involve helping companies adapt their business models to pivot their businesses to respond to Covid-19.
She also said it was vital to support Irish enterprise to take actions in line with the Climate Action plan.
The impact of Covid-19 and Brexit on company cashflows will be of critical importance as will continuing to invest in regionally-based companies, which account for 65pc of Enterprise Ireland client employment.
“2019 demonstrated the innovation, ambition and vision that drives the Irish manufacturing and exporting sector,” Sinnamon said.
“The strong 2019 results mean that many companies began this year in a resilient position.
“Indeed, since the outbreak of the Covid-19 pandemic we’ve seen many Irish businesses pivot in response to emerging market needs in areas such as contact tracing, traveller safety and confidence in airports and hygiene transparency in the hospitality sector. Agility and diversification are essential as we seek to trade successfully in a radically changed world.
“The second half of 2020, however, is expected to be one of the most challenging facing Irish businesses in recent history. Not only have many businesses been impacted by a significant reduction in customer demand from markets across the world due to Covid-19, but they are also facing the largest structural change to trading with the UK in over 50 years.
“Brexit is now a reality and from 1 January, for the first time, Irish exporters to the UK are going to be faced with new changes to customs procedures, regulatory alignment and, undoubtedly, additional costs. Every Irish exporter must now ensure that they take action in terms of securing their supply chains, customer base and meeting new regulatory requirements and ensure they are ready for January 1st. Enterprise Ireland is ready and willing to assist them in this vital work.”
Written by John Kennedy (firstname.lastname@example.org)
Published: 16 July, 2020