With the latest round of Brexit negotiations between Britain and the EU concluding last week in Brussels with little sign of progress, companies in Ireland remain in the dark about how the process will unfold in the years ahead, and what impact that could have on their business.
But Bank of Ireland is already taking steps to help them proactively manage this uncertainty through a series of initiatives, including a step-by-step guide to countering currency risk.
“The Brexit vote provided a spectacular reminder of the extent to which unexpected political events can drive financial markets,” said Garret Grogan, Global Head of Trading, Bank of Ireland Global Markets.
“Sterling weakness has been the principal route through which the Brexit effect has been felt. The day after the Brexit result in June 2016, the pound dropped by a staggering 8 per cent against the euro, and then subsequently by a further 12 per cent.”
Protecting against currency risk
The fate of the pound has become a key focus of financial markets as Brexit negotiations continue, Grogan added.
In response, Bank of Ireland has produced Brexit Guide: Protecting Against Currency Risk. The publication advises companies on how to plan for and reduce currency risk, by taking steps including:
- understanding and quantifying the exposure their business is open to;
- reviewing their costs and revenues to understand how exposed profit margins are to any changes in foreign currency rates;
- implementing a robust risk management policy that allows them to manage currency risk within levels they can comfortably tolerate;
- considering dual invoicing as one of a number of ways they can manage currency risk.
For Pat Rigney, preparing for Brexit will involve a keen focus on branding strategy. Rigney established The Shed Distillery in Drumshanbo, Co. Leitrim, in December 2014.
The first distillery to open in Connacht in 101 years, The Shed has since brought to market Drumshanbo Gunpowder Irish Gin, while also laying down casks for an Irish whiskey due to launch in December. It is also developing a new vodka that will hit the shelves in 2018.
The distillery exports Drumshanbo Gunpowder Irish Gin to six markets, including Britain, the US, Germany, Switzerland, Malta and Israel.
"The UK is very important to us as a market, but because we have focused on differentiating our product, that insulates us," said Rigney.
"Our gin is made using very special botanicals and has unique packaging, so that helps us to withstand turbulence in the UK. While the UK is nearby, the liquor market there is tough, so we have a more diversified approach with a keen focus on the US. For us, it's all about the brand. If you get the brand right, you give yourself a bit of protection."
Prepare for Brexit Roadshow
Rigney spoke last Tuesday at the Bank of Ireland Prepare for Brexit Roadshow event at the RDS in Dublin.
It was one of a series of 35 roadshow events taking place across the country before the end of the year, aimed at helping Irish businesses to prepare now for continued growth in the aftermath of Britain's exit from the EU.
Bank of Ireland is partnering with a number of industry bodies and advisory firms for the Prepare for Brexit Roadshow, including Enterprise Ireland, Bord Bia, IBEC and the British Irish Chamber of Commerce.
Accounting and advisory firms KPMG, Deloitte, EY, PWC, Grant Thornton, BDO and Mazars are also participating.
In conjunction with the roadshow, Bank of Ireland has launched a new Brexit Portal ( www.corporate.bankofireland.com/brexit), providing guidance and expertise for domestic and international businesses.
Bringing together insights, practical information and useful tools from Bank of Ireland and other partners, the portal is aimed both at Irish businesses requiring support on how Brexit may affect them and FDI companies considering Ireland as a potential base for their business.
Visitors to the Brexit Portal can register to attend one of the 35 Prepare for Brexit Roadshow events.
“We are very aware that our customers both in Ireland and abroad are concerned about the effect Brexit may have on their businesses," said Barry McLoughlin, Head of Brexit Group at Bank of Ireland.
"Whether it’s an insurance company in London considering Ireland as a base or an SME exporting from Longford, we are equipping them with the support they require by providing easy access to the appropriate expertise, tools and insights."
Upcoming roadshow events
Prepare for Brexit Roadshow events will take place this coming Wednesday and Thursday at Clayton Hotel Cork City, Keadeen Hotel in Newbridge, Co. Kildare, Kilmore Hotel in Killygarry, Co. Cavan, Woodford Dolmen Hotel in Carlow town and Breaffy House in Castlebar, Co. Mayo.
For more information, log on to: www.bankofireland.com/brexit/
The Brexit effect: Business insights
John Byrne, Managing Director, Byrne Looby Partners UK:
"Ours is an international business headquartered in Ireland. Right now, I am in our London office and our UK operation is, if you like, a local English business. As a service provider, our concerns about Brexit are about the labour market. We employ 50 people in the UK. Approximately half of those people are EU nationals from Greece and Italy, in particular, but also Spain and Portugal. We rely on a good replenishing supply of EU graduates educated to very high standards. There is a churn in that these people tend to spend about four to five years in the UK. They build up experience and money and then typically want to go home to settle down. They come to the UK because there are no visa requirements and they get entitlements to healthcare and access to opportunities in further education. As it stands, these EU citizens will probably maintain their entitlements if they are already in the UK, but we do not know what provisions will be in place for EU citizens coming into the UK post-Brexit. The likelihood is that they won't have the same entitlements as UK citizens and Britain will find itself competing with the US, Canada and New Zealand for their skills. My worry is that the labour market here will take a painful hit, which will have a knock-on effect for our business."
Pat Rigney, founder and managing director, The Shed Distillery:
“We have a strong presence in the British market. Our Drumshanbo Gunpowder Irish Gin is stocked there by Tesco and Asda. Before Brexit came about, our focus was always on developing a strong brand that would not be heavily UK-focused. Going forward, our plan is to continue to focus on building the brand to make it as strong as it can be and to also focus on many markets. Branding in our sector is about the whole experience, so for our gin, it’s about how you make it, where you make it, the packaging and the presentation. You really need to communicate the story to the consumer. How the product makes them feel is the value for us as a company.”