Minister Humphreys addresses conference discussing the findings of the Copenhagen Economics report: “Ireland and the Impacts of Brexit: Strategic Implications Arising for Ireland from Changing EU-UK Trading Relations”
Croke Park, 21st February 2018
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Ladies and Gentlemen.
I am delighted to welcome you to Croke Park to discuss the recently published Copenhagen Economics report on “Ireland and the Impacts of Brexit”. The independent report was commissioned by my Department, and is part of the Government’s response to Brexit.
Today will give us an opportunity to hear first-hand from the authors. Together, we will consider their findings and discuss the implications for Ireland at national, sectoral and firm level.
We will also examine the approaches we might take to minimise risks, maximise opportunities and develop additional mitigation actions. We have a very interesting line-up of speakers today.
As well as our keynote address by Martin Thelle, the Managing Director of Copenhagen Economics, I am looking forward to our panel discussion this morning. Our panel is made up of representatives from some of the most impacted sectors, including pharma, retail and exporters generally, as well as Michael Creed, the Minister for Agriculture, Food and the Marine, who is well aware of the challenges facing the agri-food sector.
We will also have the opportunity to hear from Paschal Donohoe, Minister for Finance and Public Expenditure and Reform. He will talk about the Government’s longer-term economic strategy, and how, through targeted and productive capital investment, we can best prepare our economy and companies to meet the challenges on the horizon.
Before we delve into the content of the Copenhagen study, however, it is important to put today’s event in context. Brexit, as we all know, is the most significant challenge facing Irish enterprise for many years. It will involve long-term, structural and disruptive change, that will have a significant impact on how we do business.
We are already seeing the impacts of Brexit in terms of currency. The fall in value of sterling has impacted on profit margins, and the value of our exports to the UK. However, the impacts go beyond just currency. And, while there is still a lot of uncertainty, there is no doubt that change is coming our way, and that challenges will come with that change.
So, the Government is engaged in intensive planning, and has been for some time. Just look at our last two Budgets, and the tailored actions of our enterprise agencies. Or look at Project Ireland 2040, which aims to Brexit-proof Ireland by investing in our future. My Department is central to this Government-wide effort.
Today’s event is just the latest in a series of ongoing engagements with stakeholders, which we will continue to roll out as the situation evolves. On the negotiations, in the run-up to Christmas, there was a flurry of activity and significant progress was made. As a Government, we achieved the goals that we set out to achieve in phase one.
We secured concrete commitments on the maintenance of the Common Travel Area, and on the protection of the Good Friday Agreement. We also secured clear and strong commitments on avoiding a hard border, and on how this will be achieved.
Our focus at this point in the negotiations is on advancing work in three distinct areas.
1. First, we need to complete work on the withdrawal issues, and to start drafting the relevant parts of the Withdrawal Agreement.
This is a very important next step, as the Agreement will be legally binding, and will reflect the principles and commitments agreed in phase one, including on Irish-specific issues.
These Irish-specific issues will continue to be taken forward in a distinct strand of the negotiations in phase two.
2. Second, negotiations on the transitional arrangements have been prioritised in the first part of phase two.
These arrangements are hugely important for Ireland in giving certainty to individuals and businesses. The EU has proposed that the status quo would be preserved during the transition.
The aim here is to avoid any gaps or ‘cliff-edges’ between when the UK leaves the EU, and when a future relationship agreement comes into force.
We hope that the UK can agree the transitional arrangements as soon as possible.
3. Third, it has been agreed to intensify work so that we can start discussions on the framework for a future EU-UK relationship.
In discussing this framework, we can begin to address the very serious concerns of many businesses and sectors represented here today.
Ireland wants the closest possible relationship between the EU and the UK, including on trade. Undoubtedly, the ideal outcome would be for the UK to remain in the Single Market and Customs Union.
But of course, this is ultimately a decision for the UK. And, it is regrettable that the UK’s current position is that it wishes to leave both. Nevertheless, it is still our view that any EU-UK future relationship agreement should be ambitious, and as wide as possible in its scope.
Crucially, it should avoid any tariff barriers and to the greatest extent possible minimise any non-tariff barriers, while ensuring a level playing field. In fact, this is a key finding contained in the Copenhagen report.
The study examines the implications of Brexit for the Irish economy and trade, and quantifies the impact of possible new barriers to trade, which might emerge as a result of Brexit. It also provides analysis of the likely impact of Brexit on key sectors of the Irish economy.
Overall, it enhances our understanding of the impact of Brexit, and it will help to inform our negotiating position and the development of mitigation actions. It considers a range of possible Brexit scenarios: an EEA-type scenario, a customs union-type scenario, an FTA scenario and, in the worst case, a WTO scenario.
While I will leave detailed analysis of the findings to Martin, all of the scenarios considered produce a result that is less favourable for Ireland than a non-Brexit scenario. Nevertheless, regardless of the scenario examined, the Irish economy is still expected to record strong, positive growth out to 2030, and it is important to remember that.
In a nutshell, Brexit has a dampening impact on our growth, resulting in a lower growth rate than would have otherwise occurred. But overall, we will continue to grow regardless.
From a domestic policy perspective, particularly at a sectoral level, the analysis highlights a number of challenges, as well as some opportunities. The impact of potential new non-tariff barriers is particularly striking.
Coming from the border region, I am very conscious of the importance of cross-border trade, and the risks associated with any regulatory divergence. I am also very much aware of the regional impact of Brexit, not least because the most impacted sectors are important regional employers.
And, the sectoral analysis makes for stark reading. Indeed, around 80% of the employment in the five sectors highlighted in the report is based outside of the Dublin region.
So, without a doubt, Brexit will be felt more in the rural parts of the country where these sectors dominate, especially agri-food. However, it is important to note that the analysis is conducted on the basis of no policy change that is, as if no mitigation measures were taken by Government or firms.
In reality, of course, the Government continues with its detailed work to prepare for the UK’s exit, in parallel to our work on negotiations in Brussels. This includes contingency planning for all possible scenarios.
We have already taken significant steps to prepare our economy for Brexit, and we will hear more about these preparations throughout the morning.
Focussing first on my own portfolio, our “Building Stronger Business” document sets out the range of actions both underway and planned by my Department and its Agencies.
The document has four pillars, the first of which focuses on competitiveness.
1. We are working to create the best environment for business to grow, export and create jobs; this includes ensuring that firms have access to finance.
For example, we have introduced Enterprise Ireland’s Regional Enterprise Development Fund; a second call for proposals with funding of €30m will be announced by the end of March.
And, at Friday’s launch of Project Ireland 2040, we announced that we will continue to operate this scheme on a rolling basis after the next call.
We are also progressing a €300m Brexit Loan Scheme announced as part of Budget 2018, in partnership with the Department of Agriculture, together with the EIB, the SBCI and the European Commission.
The Scheme will be open for applications by the end of March, and there is a flyer in your packs with more information.
Furthermore, we are examining policy proposals for a new, longer-term Business Investment Loan Scheme to support businesses to invest strategically for a post-Brexit environment.
Among other initiatives, we are looking at a new Business Advisory Hub service, which would focus on business development for a post-Brexit environment.
Meanwhile, we are examining other possible measures to support some of our most exposed and impacted companies, should the need arise.
Such measures may need a greater level of support than is required under current State aid rules, and this is something my officials are examining along with officials from DG Competition.
We also need to have the right framework conditions for business to grow, including ensuring that our tax regime and infrastructure spend promote national competitiveness, and that the enterprise agencies are appropriately resourced.
Increases secured in Budgets 2017 and 2018 will enable the recruitment of up to 100 additional Brexit-related staff, including in Enterprise Ireland and the IDA, to support our work in this area.
2. The second pillar of our approach is to drive firm level innovation.
We are targeting R&D funding through our agencies to support innovation in new products and processes, which firms need to compete and grow.
We are investing in the pipeline of the next generation of innovators, through a new postgraduate researcher programme worth €7.5m, and supporting a new Large Scale Research Centre through additional funding of €4.25m to Science Foundation Ireland this year.
At the Government’s Project Ireland 2040 launch on Friday, we announced a number of additional measures in this area, including a new €500m fund for disruptive technologies.
3. Thirdly, we are supporting firms to trade.
We are helping firms to start exporting, to grow their exports in existing markets and to diversify into new markets and regions.
For example, my Department’s agency, Enterprise Ireland is seeking to increase client exports to the Eurozone by 50% by 2020.
Government is also working with EU partners to expand the portfolio of Free Trade Agreements, while the IDA will continue to attract overseas investment to Ireland.
Meanwhile, we are pursuing an expanded programme of trade missions to support our export diversification efforts.
4. Finally, we are working across government to ensure we get the best outcome possible for business from the Brexit negotiations.
In tandem with the ongoing work of Government, however, businesses need to play their part. Without a doubt, some businesses are planning for Brexit. But, without a doubt, many are not.
So, regardless of the uncertainty, as a first step, I would strongly encourage businesses to start assessing risk and planning.
My Department’s agencies have a range of Brexit-related supports available - including the Brexit SME Scorecard, the ‘Be Prepared’ Grant and the Market Discovery Fund - so I would urge you to take them up.
In the meantime, I look forward to our discussions this morning, and I hope that we will hear lots of different voices and opinions.
Go raibh mile maith agaibh.
Notes to Editor
For further information contact Press Office, Department of Business, Enterprise and Innovation: Phone: 01- 6312200; email: email@example.com.