PwC issues stark Brexit warning to Irish firms

Better get planning for a "divisive, damaging Brexit divorce”...

Business services and advisory group PricewaterhouseCoopers has advised Irish firms to start planning for the worst-case Brexit scenario immediately.

PwC's downbeat assessment is that, given the time constraints involved, it will be difficult for a trade deal to be put in place by the end of March 2019.

Not helping matters is the position of the EU – reaffirmed by German Chancellor Angela Merkel yesterday – that the divorce process must be agreed before new trading arrangement can begin.

PwC concludes that there is a "very real risk of a divisive, damaging Brexit divorce".

It argues that an "assertive national effort" is needed to avoid this and safeguard Ireland if the UK exits the EU with no trade deal in place. 

PwC particularly advises firms to start planning in terms of their raw material supply lines if they come through the UK, and in terms of broadening their export markets if they are overly dependent on the UK for sales.

Irish food exports to the UK will be especially vulnerable in the absence of new arrangements with the EU – World Trade Organisation tariffs could then kick in, which would impose tariffs of up to 60% on certain agri-food products.

Feargal O’ Rourke, managing partner of PWC Ireland, told Breakfast Business that the threat to our UK exports could be more pronounced from a different direction:

 

"I think for the agri business, you're now going to find Brazilian beef on the [UK] shelves. Or New Zealand lamb or Australian beef.

"So it's more the competitive element of Britain now being an open market that will cause, I suspect, most angst in the agri-food business."

"One thing that has really surprised me talking to companies," O'Rourke continued, "is they think they understand their supply chain. They think 'yes, we know where this comes from'.

"But when you delve into it a bit further, they don't realise that [although] they bought it in the Netherlands, it's actually going to the UK for some processing on the way before it arrives in Dublin. They're going to have to change that supply chain.

"To the extent that that continues, there's going to be either some administrative delay or some tariffs, or some other impediments to business which haven't existed for a long time."

PwC does believe, however, that the Common Travel Area between the Republic and the UK will be retained.

O'Rourke also noted:

"Now, the EU has a track record of pulling out late, last minute, midnight deals...

"But as we sit here at this point, it would be negligent of businesses not to start planning at this stage."