An AIB survey has shown that a significant number of businesses in Ireland fear the worst about Brexit, but still aren’t preparing for it.
With just weeks until the UK government’s deadline for Brexit of 31 October, the AIB Brexit Sentiment Index for Q3 of this year showed that plans across the island are not universal.
The findings, taken across 500 SMEs in Ireland and 200 in Northern Ireland, showed that 41pc in the former have done no planning for Brexit, with a majority (53pc) following suit in Northern Ireland. According to AIB’s chief economist, Oliver Mangan, only 7pc of Irish businesses and 6pc of Northern Irish businesses have a formal Brexit plan in place.
When asked their thoughts on the likelihood of a hard border, opinions differed, with 59pc in Ireland saying it’s to be expected compared with 32pc in the north.
Meanwhile, those who have said they are planning for a hard Brexit, or have cancelled or postponed investment in preparation, amounted to 50pc in Ireland and 66pc in Northern Ireland.
Nearly half (45pc) of businesses in Ireland and 47pc in Northern Ireland have reported already experiencing its effects in the run up to the UK leaving the EU. Meanwhile, 71pc of Irish businesses have said they are now concerned for their businesses’ future, with 86pc seeing a negative impact on the wider economy.
A similar view was held in Northern Ireland, with 67pc seeing a negative impact on their business. Looking to future investment, 14pc of Irish SMEs have postponed bank borrowing for capital investment, with this rising to 35pc in Northern Ireland.
According to the ranking devised by AIB, most sectors are now at their most pessimistic since the bank started tracking SME sentiment around Brexit in 2017, with manufacturing and transport emerging as the most negative.
Mangan did note a certain amount of optimism in the finding that 45pc of Irish importers have said they have found non-UK suppliers to replace UK ones, while 39pc of ROI exporters to the UK are diversifying into other markets. However, he noted the same cannot be said of Northern Ireland where diversification rates are much lower.
Speaking of the findings, AIB’s head of business banking, Catherine Moroney, said: “Whatever the outcome of Brexit, it is highly likely that there will be increased costs relating to customs compliance and delays in the supply chain, and in a hard Brexit scenario there will also be customs duties.
“While some of these costs will be recoverable, they will result in an increased working capital requirement and businesses should ensure that they have appropriate working capital facilities in place so that the cash flow of the business has an additional safety buffer to assist the business trade through Brexit, irrespective of its ultimate form.”