Issue 1 2019
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‘No-Deal’ Preparation for Irish Businesses The heightening uncertainty surrounding a Brexit ‘deal’ or ‘no-deal’ has regrettably amplified in recent weeks. With the possibility of a ‘no-deal’ becoming more tangible, this factsheet developed by Chambers Ireland, the Chamber national body, will help you navigate this unchartered territory. For information relating to exporting and customs please see the feature in Chamberlink.
VAT
The EU’s VAT regime enables EU member country businesses to immediately reclaim the charge on goods bought from other EU member countries. In a ‘nodeal’, the UK will then be outside the EU’s VAT regime. Businesses may be required to pay the VAT on goods imported from the UK at the point of entry while waiting up to two months to reclaim the money. Businesses should re-evaluate budget plans for potential increased costs of trading with the UK.
Cash Flow and Currency
Cash flow management is a key concern. Business are advised to introduce strategies to ensure the continued ability to make payments; coordinate with UK based creditors and debtors; define priorities and consider the location of bank accounts along with forecasting anticipated receipts/payments (including estimated tariffs). While the UK does not use the single European currency, business should become aware of the exposure to the Sterling currency and mismatches between assets and liabilities, as well as whether currency clauses need to be inserted. A ‘no-deal’ Brexit is likely to result in an increase in volatility of the Sterling / Euro exchange rate. It is prudent to ensure strategies to mitigate any additional exposures are considered.
Data
Rules govern data flows to and from the UK and the EU under the General Data Protection Regulation (GDPR). These will be subject to change in the event of a ‘no-deal’. While data transfers from businesses operating within the UK to businesses operating within the EU should not be impacted by a ‘no-deal’ Brexit, businesses operating in Ireland or the EU may be forced to review existing and new contracts to facilitate future data transfers to the UK. Business should map any personal data being transferred to the UK from their organisation. Organisations should update the company/group privacy notice and other relevant documentation.
Free Movement of People
Under a ‘no-deal’ Brexit, UK citizens will become third-country nationals under EU law. Outside of EU agreements, Ireland has a Common Travel Area and associated rights secured with the UK. This allows for Irish nationals to continue to enter and work in the UK, and vice versa without restriction. This agreement does not apply to the other 26 Member States. Once Brexit comes into effect free movement of UK citizens to the EU and vice versa will cease to exist. If a business has staff who are EU citizens (but not Irish or UK citizens) working in Northern Ireland and/or the rest of the UK, these staff members will be required to make formal applications under the EU Settlements Scheme by 31 December
Cork Chamber Economic Bulletin contact: Michelle O’Sullivan, Senior Public Affairs Executive e: michelle@corkchamber.ie / t: 021 4530132
Further Reading Online • • •
• •
DBEI – Getting Brexit Ready – dbei.gov.ie Enterprise Ireland – Prepare for Brexit – prepareforbrexit.com
Irish Data Protection Commission’s - dataprotection.ie
European Commission Brexit Preparedness Notices ec.europa.eu Chambers Ireland – Brexit Information – chambers.ie
2020. This scheme launched on 21 January 2019. The Department of Foreign Affairs and Trade published information informing on migration post-Brexit. This is available on www.dfa.ie and will assist Irish business navigate any forthcoming migration issues. *The factsheet is a guidance document and as such is not fully comprehensive. The aim being to highlight the business areas that demand immediate attention in the event of a ‘no-deal’ Brexit.
www.corkchamber.ie
2018
Q4
Economic Trends Survey Results
Executive Summary The final economic trends survey of 2018 reports on member experiences during October, November and December. This quarterly survey gathers information across a range of metrics to assess business confidence, the operating landscape, skills and the overall perspectives of business for 2019. The Q4 survey included a focus on the inescapable topic of Brexit, and business preparedness for this. Predictably we report a slight decrease in confidence reported by businesses to 92%, from 96% in Q3. In the context of the heightening uncertainty with our closest trade neighbour this is of little surprise. With the March 29th exit on the horizon and with the prospect of a ‘no deal’ being elevated as a real possibility, business is cautious and rightly so. Though consistently at the higher end of the scale, Cork business confidence is overall in a very healthy position at 92%. Summarising the response to the Brexit preparedness questions, we report that 57% of respondents have reviewed their operations in anticipation of a Brexit, with 37% reporting the oversight now of a dedicated team member in preparing for Brexit scenarios. The majority of these businesses have reviewed business resilience across the movement of goods and services, followed by supply chain, and sales and marketing. Of respondents, 11% have accessed government developed tools and supports which have been developed to help businesses mitigate risk. 18% of respondents were not sure whether these supports had been accessed with 17% indicating non-applicability to their business. In relation to turnover and net profit, 67% of businesses report an increase in turnover during Q4, up from 62% in Q3, alongside 57% of business respondents indicating an increase in net profit, up from 52% in Q3. From a skills perspective, 47% of businesses report current recruitment needs, with 29% of these businesses indicating difficulty in recruiting the right skills with a vacant position remaining unfilled for 3+months since initial advertisement. These vacancies range across experienced engineering staff, hospitality and specifically security staff. When responding on threats to business growth, the Top3 highlighted were Brexit, managing cashflow and cost competitiveness. Several respondents also emphasise their experiences of labour force shortages across skilled roles. The value of and need for more upskilling initiatives and apprenticeships was highlighted. In completing the survey, respondents were asked to
include their observations of the business and broader economic landscape. Here we include a sample of comments: “Greater effort needs to be placed on local upskilling initiatives, apprenticeships for employees and management teams”
John McLaughlin, Burgolarm Security Products Ltd.
“There will be winners and losers in the Brexit fallout. The winners will be those who take control of this chaos by preparing a Brexit formula. Time to stop the speculation. Time to Plan - Act - Do!”
Perry Simpson, Surgan Professional Ltd.
“We need to focus strongly on sustainability and reducing our carbon footprint - by cross-business collaboration we can make a real difference for our future generations.”
Paul Downing, Hovione Ltd.
“Push for a light rail system for the city and suburbs. Open a railway station in Blackpool as trains pass close by.”
John O’Sullivan, Westbourne IT Solutions
Responding Business The responding businesses represent a broad cross section of business sizes. Micro Enterprise (2 - 10) Over 201
Between 11 - 50 Sole Trader
10%
32%
Between 51 - 100
Between 101 - 200
8%
7%
19%
24%
Also representative of a broad range of sectors. 8% 17%
Science and Technology
Industry/ Manufacturing
15%
Tourism, Travel Culture and Arts
4%
Transport
0%
Agriculture and Fishing
39%
Services
(inc. Financial Services)
Representative Respondents
10%
Construction
7%
Multisectoral
BREXIT PREPAREDNESS
Business Confidence Not
92%
8%
In our Q3 survey business confidence for was reported at 96%.
With the approach of March 29th, we asked respondents about their business experiences and course of action taken. Overall, we report that 57% of respondents indicate that operations have been reviewed in preparation for Brexit, with 22% stating this has not been completed and a further 21% adding that a review was not applicable. 37% of responding businesses have a dedicated team member overseeing Brexit preparedness.
Turnover and Net Profit estimations and 12-month predictions Decrease
No Change
37%
Yes No
63%
Increase
Response Percent %
Respondents reported the following reviews of business operations.
67%
Movement of Goods and Services
57% Supply Chain
35%
Sales & Marketing
26%
Trade
Movement of Employees
8%
7%
Other
Turnover In the coming 12 months, 75% of members expect an increase in turnover, with 72% anticipating an increase to net profit.
Employment Outlook Change to employee numbers over Q4 2018.
3%
51% YES
69% YES
46% YES
Number of business with vacancies advertised currently.
54%
Stayed the same
20% YES
YES
54%
43%
NO
18%
6%
NOT SURE
Decrease
17%
36%
Stay the same
N/A
58%
Increase
No
1
37% YES
11%
Decreased
Yes
Top 3
37% YES
Other areas highlighted by businesses were data protection, intellectual property, agreements and customs to do with ‘on loan’ items of high value and CE certification of construction products. 11% of respondents reported on accessing of available government Brexit tools and supports.
Increased
Expected changes to employee numbers over the next 12 months.
43% YES
47% 53%
Threats to Business Growth
Lastly 5% of respondents stated that their business has engaged a private sector consultancy to support Brexit preparations, with a further 17% stating this is not applicable to their business, and 10% unsure.
Confidence in the Irish economy 79%
6%
Brexit
2
15%
3 Cost competitiveness At 79%, businesses report very high confidence in the Irish economy at the beginning of 2019 with a further 6% very confident.
We thank members for your valued insights and engagement with this survey. Your participation is key. All previous quarterly economic surveys can be found on www.corkchamber.ie.
Jobs and Development Announcements
Family Business Barometer
Michael Lynch, Partner, KPMG Private Enterprise
Quarter 4 2018
October
• Technology firm Voxpro to create 400 jobs
November
• Park Place Technologies to create 70 jobs • World Nomads Group announced 60 new jobs • eir began recruitment drive for 200 Cork jobs • Clonakilty Distillery set to create 30 new jobs with the opening of its new distillery, visitor experience and restaurant • Cork agritech innovator ApisProtect to create 25 new jobs • Glandore opened new Lapp’s Quay location with flexible workspace, coworking and private office space with social, meeting and event space. • 20 jobs to be created at new Aldi store in Cork • Flynn Management and Contractors announce 50 new jobs for Cork, Limerick and Dublin
December
• 70 jobs to be created through new Blarney production facility ILC Dover • McDonald’s to create 65 jobs in Cork • 40 new construction workers, engineers, project managers and site operator jobs to be created in Skibbereen by EPS as part of the €28m Skibbereen Regional Water Supply Scheme
The next generation?
78%
The KPMG Family Business Barometer is an annual survey of family and privately owned businesses from across Europe including Ireland and is a valuable benchmark of the issues and concerns they face, published late last year and based on responses from over 1,500 family businesses in 26 countries, it reveals a continued confidence in the future of family businesses. Irish family businesses had a strong year of growth in 2018 and are positioning themselves for further growth in 2019. This, combined with a relatively favourable economic environment, has helped to spur the confidence of family businesses and their optimism. In fact, almost 4 in 5 (79 percent) of Irish respondents said they were confident or very confident about the prospects for their family business in the year ahead. However, the Barometer also shows that in Ireland and elsewhere in Europe, family and privately owned businesses are facing challenges on many fronts. They’re engaged in global competition to attract talent and also face an increasingly challenging regulatory environment, meaning they can no longer depend on conducting business as usual. Growing political uncertainty, not least the continued uncertainty around Brexit (which has only intensified since the survey was taken) also has many businesses pondering what could be just around the corner. Despite these factors, family businesses continue to flourish and innovation is top of mind for many. Companies are being pushed to make dramatic changes to adapt to new market conditions and to compete with new business models. The survey found that family businesses are rising to the innovation challenge, actively monitoring signals of change and streamlining decision making. Looking ahead, innovation is expected to remain a significant priority in 2019. In the survey, 24 percent of respondents across Europe listed innovation as one of their top two priorities. However, in Ireland moving into new markets (31 percent) and diversifying into new products (22 percent) were listed as the top two priorities. In Ireland, political uncertainties were also cited as the single biggest concern (21 percent) by respondents, highlighting the likely negative impact of Brexit on many Irish businesses. Reflecting Brexit related concerns and a desire to move into new markets, 38 percent of Irish respondents increased their activities abroad in the last year. To find out more, see kpmg.ie
of Irish family businesses are considering passing their management to the next generation.
European Family Business Barometer - Ireland Edition © 2019 KPMG, an Irish partnership
4746_Famil_ Biz_ad_Cork_Chamber_Jan_2019.indd 1
Cork Chamber - Economic Bulletin
Find out more in the Ireland edition of the KPMG Private Enterprise European Family Business Barometer at kpmg.ie
28/01/2019 16:47