IBEC wants up to €400 in Brexit aid for companies

IBEC wants up to €400 in Brexit aid for companies

Business organisation IBEC reckons Irish companies will need subsidies amounting to about 5% of annual sales, or up to €400, if the UK crashes out of the EU with no deal.

In a major document launched to coincide with the start of talks in Brussels, IBEC says a temporary framework for state aid will be needed at a European level in order to offset the worst impacts of Brexit on otherwise viable firms. There is precedent in the relaxation of aid restrictions to cope with the recession in 2009. It also wants the Juncker Investment plan on connective infrastructure for remote EU regions to be adjusted to take account of Ireland’s new situation.

The paper contains a useful summary of Ireland’s exposure: ” Roughly 14% of goods and 20% of services exports go to the UK, however this proportion is much higher for specific sectors of the economy.  Agri-food is our largest and most exposed indigenous export sector. The sector is both labour intensive and a large purchaser of primary output. Over €4.3 billion annually is spent on purchases from primary producers. A further €2.1 billion is spent on compensation of employees in the sector who primarily live in rural locations. There are 230,000 people employed directly and indirectly in the agri-food supply chain and 40% of its exports (€4.4 billion) go to the UK. In the region of 46,000 jobs in the sector (2.3% of total employment in the economy) are linked directly or indirectly to exports to the UK. European Commission multipliers suggest the total number of jobs reliant on agri-exports to the UK could be as high as 65,000. Of this, over 8,000 jobs are in the food manufacturing sector.”

There is a sub-text here which is bound to rear its head in future elections: neither pain nor gain will be evenly spread. Greater Dublin with its international employers will enjoy a degree of Brexit immunity and may even pick up a few big banks for the docklands. The big hit will be taken by indigenous firms concentrated in agri-food in rural areas.

“Overall, it is the indigenous sectors of the economy that are most reliant on the UK. Over 40% of their output goes to the UK, compared with only 10% of that from non-Irish companies. Indigenous exporters spend as much in the domestic economy through purchases and wages as the multinational exporters. They also employ as many people, with even greater regional spread. The impact of Brexit on the producers of 11% of our total exports will be as important for the domestic economy as the fortunes of the producers of the other 89%.”