DIGI launches 5-point Brexit plan

A 6.2% decline in British tourism in 2017 coupled with a rise in cross-border shopping could cost the economy €130 million before the end of the year, the Drinks Industry Group of Ireland has predicted.

With this in mind and to safeguard and protect the economy, the DIGI has put forward a five-point Brexit plan to Government ahead of Budget 2018, which includes the establishment of regional Brexit hubs to provide support for rural drinks and hospitality businesses and a 15% reduction in excise tax.

The DIGI’s recommendations come as Brexit continues to devalue Sterling and encourage cross-border shopping – both factors that could cost Ireland’s drinks and hospitality businesses as much as €130 million this year.

The finding was detailed in the DIGI’s new report, The Economic Impact of Brexit on the Drinks and Hospitality Sectors, authored by Dublin City University Economist Anthony Foley, which outlines a number of Brexit scenarios and how they could affect Ireland’s drinks industry and wider hospitality sector.

The DIGI report says that the continued Sterling slump, combined with a hard Brexit, could cost drinks and hospitality jobs and lead to business closures.

Ireland’s tourism industry, inseparable from its drinks industry, is disproportionately reliant on the British market, states the report. 40% of all foreign visitors to Ireland originate from the UK but a weaker Pound has made this country more expensive for UK visitors as a holiday destination.

In the first seven months of 2017, the number of British visitors to Ireland dropped by 6.2%. If this decline continues, based on previous spending patterns (British tourists spent €1.1 billion in Ireland in 2016), Irish businesses could lose out on as much as €70 million in revenue this year alone, believes DIGI.

 

Cross-border losses

Cross-border shopping is also on the rise. In Q3 of 2016 – the latest data available – the number of Republic of Ireland-registered cars in a sample of Northern Ireland shopping centres was 56.3%, the highest since Q4 of 2009.

This trend is likely to continue as Sterling approaches parity with the €uro.

The DIGI report estimates that this could cost Irish drinks businesses €60 million this year as Republic of Ireland shoppers cross the border to buy cheaper alcohol.

 

Avoiding crisis

A Brexit-induced downturn could lead to job losses and business closures, especially in rural Ireland where the industry is often the major—and sometimes the only—employer, points out the DIGI which is calling on Government to take special notice of Ireland’s drinks and hospitality sector as it formulates Budget 2018 or what it has dubbed the ‘Brexit Budget’, the penultimate before the UK officially leaves the EU.

DIGI has recommended five key policy changes and initiatives:

 

1. Reduce excise tax by 15%
2. Maintain the 9% VAT rate for the hospitality industry
3. Lobby for and secure EU funds to protect Ireland’s drinks and tourism businesses
4. Create regional ‘Brexit hubs’ to provide support and highlight specific local issues faced by rural drinks and hospitality businesses
5. Establish ‘Brexit Business Board’ to develop national plans and initiatives for business cost reductions.

 

“Ireland has already felt the tremors of Brexit,” commented DIGI Secretary and Chief Executive of the Licensed Vintners Association Donall O’Keeffe, “Our new report estimates that if trends in British tourism and cross-border shopping continue, perpetuated by a devalued Sterling, Irish drinks and hospitality businesses could lose as much as €130 million this year alone.

“If the UK leaves the EU without a deal and a hard Brexit occurs, this cost will be much more significant. In addition to less tourism spend and more cross-border shopping, Irish drinks exporters will be subject to tariffs, new regulations, border checks and a smaller UK market, all of which will lead to massive administrative expenditure that could easily sink some smaller SMEs in our industry.

“DIGI strongly urges the Irish Government to enact pro-enterprise, pro-growth measures in Budget 2018 that safeguard Ireland’s most vulnerable industries, particularly the drinks and hospitality sectors which are disproportionately exposed to Brexit.

“Many of DIGI’s recommendations can be put into action immediately, like reducing excise tax.

“DIGI believes that closer collaboration and co-operation between businesses, representative bodies and the Government, through local Brexit hubs and a national Brexit Business Board, will create real solutions that help drinks and hospitality businesses weather the coming Brexit storm and grow into a post-Brexit future.”

The drinks industry directly employs 92,000 people and enables 210,000 jobs in the wider hospitality sector. Through a nationwide network of pubs, hotels, restaurants, off-licences, distilleries, microbreweries, wholesalers and distributors, the drinks industry exports €1.25 billion in goods annually and generates €2.3 billion of revenue for the Exchequer.