KPMG's Head of Brexit, Brian Daly, says having a plan in place will help businesses manage the challenges and opportunities Brexit will bring
It has become clear that many companies have put a Brexit plan in place so they are ready to respond to the challenges and opportunities Brexit will create – regardless of the uncertainty over the eventual outcome.
However, Brian Daly, Partner and Head of Brexit with KPMG in Ireland urges those Irish businesses who to date have not adopted a plan to act now.
He encourages them to put a Brexit plan in place using the same areas as a framework that KPMG uses for its client businesses, namely;
Daly acknowledges that inevitably the outcome of the negotiations between the EU and the UK will be determined by politics. “This is likely to mean that what could be seen as shorter term goals of certain sectoral interests will be sacrificed in the longer term interests of EU unity. The British Government has stressed its desire for agreement which will see a strong partnership between the EU and the UK, whilst committing to negotiate in its own best interests. In response, EU President Donald Tusk notes a determined and united group of Member States seeking to protect the interests of the 27.”
Ireland is helpfully mentioned specifically in the UK notification document with the aspiration that the UK’s departure ‘does not harm the Republic of Ireland’. This is a credit to the Government’s diplomatic skills, as are the references to Ireland’s unique challenges in the EU Commission’s guidelines.
The challenges facing individual states or sectors in seeking special treatment are significant. For example, it has been reported that the German car industry has already accepted that a special deal for their sector will not be prioritised in the interests of EU unity.
Ultimately, the implications of Brexit for businesses in Ireland, both North and South, depend on the terms of the future EU-UK relationship and on the structure of each individual business as well as the sector in which it operates.
Notwithstanding the uncertainty, according to Daly, having a plan in place will help you manage the challenges and hopefully the opportunities that Brexit will bring.
With businesses responding positively to the task of planning ahead, what is the Irish Government doing to make Ireland Brexit ready?
Coinciding with Budget 2017, the Department of Finance issued a paper entitled “Getting Ireland Brexit Ready” to provide an overview of the policy responses that have been included in the Budget to help Ireland remain competitive and protect the public finances from Brexit-related shocks.
The paper acknowledges that with around 16 percent of all exports going to the UK and a similar share of imports depending on the UK, Brexit is expected to have a negative impact on the economy and future growth. However, the severity of the impact is difficult to gauge as the terms under which the UK will leave the EU are not yet clear.
The Government announced a number of taxation measures in Budget 2017 to get Ireland “Brexit ready” specific to, SMEs, Irish exporters, entrepreneurs and the agri-food sector.
“The commitment to establish a “rainy day fund” and a new, lower debt-to-GDP target (a ratio of 45 percent to be achieved by the mid-2020s) are also influenced by Brexit concerns,” said Daly.
A new Government cabinet committee has been established, and a new Second Secretary General has been appointed in the Department of the Taoiseach to oversee the integration of international, EU and Northern Ireland functions.
Daly said, “The final shape of Brexit will determine whether there are customs duties to be paid on imports, whether there are restrictions on certain goods and services, and whether the customs procedures are relatively simple or complex. The Revenue Commissioners are reviewing customs procedures to assess potential problems and identify ways of minimising business costs and maximising the facilitation of trade.
“At present it is not possible to resolve these issues but merely to seek to scope them and be adequately resourced to respond to problems that may emerge.
The sectors identified by the Government as being highly exposed to and reliant on trade with the UK include: food and beverage, electrical equipment, materials manufacturing and traditional manufacturing.
Whilst services sectors in general would not be affected by trade tariffs to the same extent as manufacturers, the likes of tourism and hospitality are significantly exposed to the Euro-Sterling exchange rate and this sector is also seen as a Brexit-exposed sector within the economy.
The Government’s paper acknowledges that Pharmaceutical Manufacturing, and Financial and ICT services sectors, which tend to have high foreign ownership, also have significant export relationships with the UK. Key policy measures identified to assist the FDI sector to continue to attract jobs to Ireland include the ongoing commitment to the 12.5 percent corporation tax rate, Ireland’s R&D Tax Credit regime, the Knowledge Development Box regime and the extension of the SARP regime.
The paper acknowledges that the Government will need to respond to any changes made by the UK to strengthen their overall tax offering, so that Ireland can continue to be relatively attractive compared to the UK from an overall taxation point of view.
Daly commented, “Undoubtedly further responses will be needed when more details emerge on the terms on which Brexit will take place. It will also be very helpful to have similar policy responses emerge from other parts of Government and the Financial Regulator. This will require us to have a framework to review performance and make changes on a dynamic basis so that appropriate actions are taken to minimise the adverse impact of Brexit whilst also taking advantage of whatever opportunities may emerge.”
This article was originally published in The Sunday Business Post on 30 April 2017 and is reproduced here with their kind permission.