Katie Daughen, British Irish Chamber of Commerce, delivered the following Oral Submission to the British Irish Parliamentary Assembly Committee B on March 10th
Firstly, I would like to thank the members of the Committee for inviting me to give evidence today on this hugely important issue.
For those who do not know us, the British Irish Chamber of Commerce is the only organisation representing business activities with interests across our two islands. Our raison d’être is to champion, protect and grow the trade between the UK and Ireland – trade that is worth in excess of €60 billion a year and that sustains over 400,000 jobs, evenly spread across Britain and Ireland.
The UK is Ireland’s largest two-way trading partner, supplying 34% of our imports and taking 16% of our exports. Conversely, Ireland is the UK’s fifth largest trading partner. The British Irish Chamber of Commerce works on behalf of its members, large and small, North, South, East and West, connecting them to fresh business opportunities between and from these two islands, growing trade, investment and jobs. We want to ensure that this work continues beyond the current political crisis that now faces us.
As the only organisation representing business interests in both Ireland and the UK, we are uniquely placed to see both the opportunities and challenges that Brexit provides, and there are both.
Before looking at potential opportunities, I would like to highlight the challenges and risks that business are now facing. The first of these is rising costs due to the decline in sterling. While this was first, and most publicly felt in the Irish agri-food sector with some businesses even being forced to close due to rising costs and falling income, the signs now indicate that the 13% depreciation in sterling will soon be felt in the UK economy.
Recent figures released by the Office for National Statistics show that consumer price inflation rose by 1.8% in the year to January 2017 and that this rate was the highest recorded since June 2014. More worrying perhaps, are the producer price inflation figures. In addition to factory gate prices increasing by 3.5% in the year to January 2017, input prices (those paid by manufacturers for materials and fuels for processing) rose by a staggering 20.5% in the same period, the fastest rate of annual growth since September 2008. Common sense dictates that it is only a matter of time before these price increases get passed on to the consumer and we see a resulting rise in inflation in the UK.
Another challenge being faced by businesses on both islands is the risk to their competitiveness due to halts on investment because of the current uncertainty. One of the first casualties of Brexit was predictability. In a survey conducted by the Chamber last October, 73% of respondents said they needed clarity of Brexit terms – more than any other business support offered. We have members reporting of frozen investments due to the uncertainty that currently reigns. Uncertainty risks crippling these businesses, many of which are small to medium enterprises, who have already had to work hard to secure their business in the face of currency volatility. This lack of investment is now risking making these businesses less competitive as they try to formulate a business plan for the next five years with little idea of the trading environment that will emerge over this time frame.
Competitiveness will also be challenged by the type of future trading relationship the UK finally secures with the EU. All signs indicate that the UK is unlikely to be able to “have its cake and eat it” as the Prime Minister might like. The EU is expected to resist any deal that will result in the UK being better off outside the EU. Therefore a deal must be sought that is of benefit to both. We believe this is essential as a bad deal for the UK will be a bad deal for Ireland and should be avoided at all costs.
The importance of achieving this becomes evident when you look at the integrated trading relationships and supply chains that exist throughout the EU including the UK. There is no such thing as a British car or sandwich anymore. Your Scottish pizza is often made using Irish ingredients and that icon of British manufacturing, the Bentley while assembled in the UK, it is done so using a Bratislava chassis, German engine and Irish trim, and is often paid for using Irish finance.
And this is just one small example in the mountain of issues that will need to be sifted through by negotiators once Prime Minister May triggers Article 50 later this month. In addition to securing a new trade deal with the EU, the UK will also need to replace the 53 trade deals to which its party through its EU membership. The UK will also need to find solutions to offset the substantial risks currently being faced by exporters, university research, the City of London, labour supply, food security and that’s before we even mention Northern Ireland.
There is nothing in Theresa May’s 12 point plan that suggests we can avoid the return of some sort of border on the island of Ireland. While retaining the Common Travel Area should ensure the free movement of people and that access to services is maintained, this will not apply to the movement of goods. Unless the border is established in the Irish Sea, it is impossible to see how this movement will be monitored without some sort of border control being set up on the island itself. While there are models to follow regarding the transit of HGV’s that should make this fairly unobtrusive, customs officers will need to be present to inspect vehicles as is necessary. There is also yet to be found a way that will allow for the monitoring of the “man in a van” that will comply with EU requirements while maintaining the open border that we enjoy today.
These are just some of the risks facing both the UK and Irish economies as a result of Brexit, but as I said earlier there are also opportunities. This is now our Whitaker moment to think big and come up with imaginative solutions to the problems we now face.
The Chamber is aware of the great work being done by Revenue and Customs to this end in exploring ways to ensure that whatever the outcome, the border remains as “frictionless” as possible. This work is well advanced and solutions to potential issues are already being put forward.
But we feel more can be done. We believe that the political parties, working together should deploy a National Strategic Opportunity Plan. Brexit is likely to outlive any one Government and therefore we believe a National Plan with buy in from all parties would provide businesses with the stability they need at this critical time.
We also believe there is now an opportunity to develop a UK / Ireland Powerhouse Strategy. By working together, we can limit the potential damage that Brexit might inflict on our economies. Ireland is currently the next best option for those in the UK and can offer firms an assured EU base. By forming strategic partnerships we can ensure that the trade between our islands continues beyond this phase and we can protect sectors at risk such as the City of London, university research, and the all island trade on the island of Ireland.
But in the interim, there are some specific outcomes that should be sought as we enter negotiations. A transition framework will be essential if we are to come through Brexit relatively unhurt and should be secured as early as possible. When feasible, clear updates on the negotiations process should be made in good faith so as to avoid any additional uncertainty for businesses.
We will also need the rest of the EU27 to accommodate Ireland’s unique interdependence on UK connectedness. Ireland should not unduly suffer as a result of a decision it did not make. By recognising the unique situation of Ireland, we can help protect the Irish and Northern Irish economies; ensure the peace process remains strong and intact; and protect the close links and familial ties that exist between our two countries through maintaining the Common Travel Area.
Finally, we should think carefully about what we would want our successors to say in 50 years time about the choices we get to make now. Brexit is a catalyst for us to make brave decisions that will benefit generations to come. We should work together and look forward with ambition and optimism and with faith in our collective abilities. We should not only address the challenges and opportunities of the immediate aftermath of the UK people’s decision to leave the EU, but we should also ask why and what has changed to make a strong nation so decide. Armed with that understanding, we can and must work together in our common interest knowing that we may be the first generation to be able to deliver comprehensive local and even universal wellbeing or the last to be given the chance.