Businesses on both sides of Irish border ‘already affected by Brexit’
The AIB Brexit Sentiment Index reveals that half of SMEs in the Republic of Ireland and Northern Ireland have cancelled or postponed investment.
Businesses on both sides of the Irish border have already been affected by Brexit, a report has found.
Two thirds (66%) of small and medium enterprises (SMEs) in Northern Ireland, and 50% in the Republic of Ireland that had planned to expand or invest in their business have either cancelled or postponed planned investment due to Brexit.
These are among the findings of the latest AIB Brexit Sentiment Index for Q3 2019 which comes just weeks before the United Kingdom is scheduled to leave the European Union at the end of October, leaving an EU border running across Ireland.
Sentiment is down across all sectors but worryingly it is at an all-time low in the Manufacturing and Tourism sectors, both very important for the NI economy. Brian Gillan
In terms of Northern Ireland SMEs, it found that 47% have already been impacted by Brexit and 32% expect a hard border.
Among SMEs south of the border, it found that 45% of SMEs are being affected by Brexit and that 59% expect a hard border.
Overall the AIB Brexit Sentiment Index, with a baseline of zero and potential range from +100 to -100, reached an all-time low at -41 among NI SMEs and -51 in the Irish Republic.
Brian Gillan, head of business and corporate banking at First Trust Bank, attributed the results to political uncertainty.
“With the continued political stalemate and uncertainty that abounds around Brexit it is perhaps not surprising that the Brexit Sentiment Index has reached an all-time low here in Northern Ireland at -41,” he said.
“Sentiment is down across all sectors but worryingly it is at an all-time low in the Manufacturing and Tourism sectors, both very important for the NI economy.
“The continued uncertainty is also severely hampering investment planning with 66% of NI business this wave advising that their investment plans have been cancelled or postponed. In tandem a higher proportion of NI SMEs are postponing bank borrowing for capital investment due to Brexit – up to 19%.
“While we understand the reluctance of businesses to plan, given the levels of uncertainty we believe there is still value in considering the potential impacts of Brexit on your business – especially in a ‘no-deal’ scenario.
“Our advice to NI businesses is to continue to work with their advisers and trade and industry groups to make sure they are as best prepared for all eventualities.”
Oliver Mangan, chief economist at AIB, added: “One of the most notable features of the surveys this year is the number of firms that say Brexit is having a negative impact on their business now.
“During Q3 this stood at 45% of SMEs in ROI and 47% in NI, much higher than in the surveys carried out in 2017 and 2018.
“Consistent with this, the number of SMEs reporting that Brexit is having a negative impact on sales jumped to 28% in the latest two surveys in both ROI and NI.
“Despite the deep concerns over Brexit, 41% of SMEs in ROI and 53% in NI have still not done any planning for Brexit. Indeed, only 7% of ROI and 6% of NI firms have a formal Brexit plan in place.
“Nonetheless, it is encouraging to see that 45% of ROI importers say they have found non-UK suppliers to replace UK ones, while 39% of ROI exporters to the UK are diversifying into other markets. However, the figures for diversification are much lower for firms in NI.”
AIB’s Brexit Sentiment Index conducted by Ipsos MRBI is a quarterly survey of more than 700 SMEs in the Republic of Ireland and Northern Ireland that assesses the attitudes of SME business leaders on Brexit and the impact on their businesses.