"We will pass the cost of tariffs along to the end-users”

“We will pass the cost of tariffs along to the end-users”

Univet was interviewed by Brexit Border Blog on behalf of Intertrade Ireland. The interview was first published on Intertrade Ireland’s website.

Univet employs 64 people at its single manufacturing plant in Co Cavan, making veterinary pharmaceuticals for cattle, sheep and pigs. “Products aimed at the dairy industry are of increasing importance for us, accounting for up to 40% of sales,” says managing director George Crowe. “We are pushing this area because we have a good set of products and good production facilities for expansion.” Geographically, sales break down at roughly 25% in the home market, 6% in Northern Ireland and 12% in Britain. In the rest of the EU Germany dominates, but the Middle East and Far East are also important markets. “Naturally we are concerned about Brexit and its broader impact, but we have no major concerns of our own. This is a niche market and although we overlap in terms of products with other producers in Ireland and across Europe, there is no overall matching competitor across the whole product range. When sterling fell sharply against the euro following the Brexit referendum, we were able to adjust our prices in sterling without meeting major resistance.

“Actually, the place where we got the currency squeeze was on the purchasing side, when the weakening of sterling led the dollar to rally against the euro. We buy in a great deal of raw materials priced in dollars from China and India, probably up to $4 million worth a year. Last year, for example, we forward-bought $3.5 million dollars to cover this trade. We expect to feel some pain in this area.”

George Crowe has no reason to believe there will be any significant tariff impact on Univet’s operations. “First of all, if we do get into a situation of trading with the UK on the basis of tariffs, I don’t expect the levels to be applied to pharmaceuticals will be prohibitively high. Even if we do, because our niche in the market is sufficiently unique, I believe we will be able to pass the cost of tariffs along to the end-users in the agricultural industry. The value is there in our products to be able to do that.” Nor does the prospect of a physical border across the island pose any major problems for Univet’s high-value but low-volume output, he believes. “We are talking about a few vans or other vehicles passing through and it is usually a case of deliveries by people other than ourselves. Besides, we lived with this before 1993, it’s a nuisance but no more than that.” On the issue of regulatory regimes, George Crowe makes a careful distinction between standards and the way they are implemented and enforced. “The big issue in our business is the length of time it takes to get a product to market up to ten years in some cases. Even if you were to come in here to me today with a product that already had all the necessary approvals, it could take two years before we could get it into production.

“As far as the standards themselves are concerned, I don’t expect any changes. The British authorities will write all the EU standards across into their own legislation and keep it in line with the EU into the future. We were in London a couple of weeks ago talking to the regulators on unrelated business and we discussed this issue in general terms. We heard nothing that would indicate any moving away from the EU standards, in fact quite the opposite. So we believe reciprocal arrangements will be put in place as they generally are between advanced economies for our sector.

“On the other hand, the British are very pragmatic in the way they do business. We would hope that they would make it easier and quicker to register new products within the existing standards regime.” Presuming Brexit does not throw up any insurmountable products, Crowe expects some expansion in the British market. “There is competition within the UK from other European producers, but curiously we haven’t been able to track anyone manufacturing competing products within Britain.” The company does not enjoy any patent protection in the UK and it has no concerns about trademark protection potentially falling away, again because of the length of time it takes to get a product to market.

Univet has not engaged any professional advisors or consultants in relation to Brexit and while the company is aware of meetings organised by Enterprise Ireland, it has not had any form of one-on-one support from relevant state agencies on the issue. “We are confident, we will cope,” concludes George Crowe.