The Alcohol Beverage Federation of Ireland has warned that a No Deal Brexit would be disastrous for the all-island drinks industry, delaying and disrupting 23,000 cross-border truck movements, applying unnecessary tariffs on cross-border supply chains and putting €364m worth of trade between the UK and Ireland at risk.
In advance of this week’s crunch EU summit ABFI has published a new position paper: Brexit and the Irish drinks industry – Priorities for the future relationship which outlines the potential consequences of a ‘No Deal’ Brexit, including:
- Regulatory and customs checks at the Irish border, leading to significant delays and additional costs for 23,000 cross-border truck movements
- Requirement for up-front VAT payments on cross-border trade
- Immediate tariffs on barley, malt, glass bottles, apples, finished cider and other supply chain inputs
- Lack of continuity in legal protection for Irish cross-border Geographic Indications for Irish Whiskey, Irish Cream Liqueur and Irish Poitín in Northern Ireland and the UK
- Lack of continuity in access for Northern Irish producers to global free trade opportunities
- Potential for regulatory divergence across a range of standards from labelling to bottle sizes.
ABFI is the all-island trade association for the Irish drinks industry and forms part of IBEC, Ireland’s largest business representative body.
“The Irish drinks industry is a highly integrated all-island sector that’s important for both the Irish and Northern Irish economies, stated ABFI Director Patricia Callan, “For us, Brexit could be highly disruptive, particularly if there was to be a disastrous ‘No Deal’ scenario. However, this need not be the case and we would urge all parties to seek to ensure that a Withdrawal Agreement is concluded and that a ‘No-Deal’ Brexit is avoided. We want to see clear, robust provisions to safeguard the all-island economy and to avoid a hard border on the island of Ireland.”
SpiritsEurope, which represents the European spirits sector, went further.
In a statement headlined “A ‘No Deal’ scenario should not be an option” it called for the urgent resolution of the outstanding issues in the Brexit negotiations before this week’s Summit.
“The conclusion of the Withdrawal Agreement, including the vital transition period, is a top priority that should be achieved without any further delay,” said Ulrich Adam, Director General of spiritsEurope. “The final version of the Withdrawal Agreement should include the reciprocal protection of Geographical Indications, agreed rules and processes to avoid a hard border on the island of Ireland and secure continuity in commercial relations with third countries.”
He feels that the disruption caused by the UK exiting without a Withdrawal Agreement is likely to be particularly detrimental to the spirits sector.
In seeking the avoidance of any hard border, SpiritsEurope also stated that “among European spirits, Irish spirits stand out for their stellar growth in exports in recent years, a growth that has been built on a seamlessly integrated all-island supply chain and underpinned by the three famous GIs: Irish Whiskey; Irish Cream; and Poitin”.
The new ABFI paper points out that global drinks exports from the island of Ireland were valued at €1.6 billion in 2017. The aggregate value of trade in drinks products between the UK and Ireland was €364 million, one-third of which, €121 million, was the aggregate value of north-south trade. The UK remains the dominant market for Irish beer (71%) and cider (85%).
“In terms of EU-UK trade, the economic interests of both the EU and the UK would be best served by the UK remaining in a customs union with the EU,” stated ABFI Director Patricia Callan, “If this cannot be achieved, then a comprehensive alternative approach must be put in place. A fall-back to EU external tariffs or WTO rates must be avoided.”
ABFI points out that a no-deal Brexit could result in a range of new tariffs on cross-border supply chains, including:
- Tariffs of up to €93 per tonne on barley and €131 per tonne on malt
- An EU external tariff of 5% on 130 million glass bottles imported into Ireland from the UK
- A 7.2% tariff on apples grown in Northern Ireland.
“Tariffs would add significant costs to Northern Irish whiskey distilleries and breweries buying barley and malt from Ireland, to Irish craft distilleries and breweries buying specialist malts from the UK and to Irish cider producers buying apples from Co Armagh,” she stated, “Similarly, tariffs on finished cider products would damage the cost competitiveness of Irish and Northern Irish cider producers, threatening sales and jobs.”
While Brexit poses risks of disruption to free trade between Ireland and the UK, it also threatens trade between Northern Ireland and the rest of the world, she added, “We do not want Northern Ireland producers to face any significant comparative disadvantage if they lose access to EU free trade agreements,” stated Patricia Callan.
The ABFI paper highlights how the Irish drinks industry operates on an all-island basis with seamless cross-border supply chains. In total the Irish drinks industry carries out over 23,000 truck movements across the Irish border every year, over 5,000 of which are alcohol tanker-movements.
“The Irish drinks industry is clear in our desire to avoid a hard border and for seamless alignment between the EU and the UK – particularly between Ireland and Northern Ireland – on regulation, VAT and excise,” she stated, “Checks at border points could add an additional hour or €100 per truck movement to costs.
“We also need to avoid divergence on VAT. Drinks producers in border counties have, at any one time, up to 40 ‘live’ suppliers on the other side of the border. If there was to be no Brexit agreement on VAT then, for the first time since 1993, an import VAT charge could become payable up-front at the point of importation resulting in significant cashflow disruption and increased administration costs.”
Patricia Callan went on to highlight the double-standards of the Irish Government on North-South regulatory divergence: “Already, the Irish Government is signing-up to regulatory divergence in labelling between North and South by seeking to introduce country-only labels for Ireland under the Public Health (Alcohol) Bill.
“This type of negative regulatory divergence will be highly damaging to the all-island drinks industry, particularly for smaller producers, such as Northern Irish gin producers, for who Ireland and Northern Ireland are their two largest markets and who will now require two labels for the one island. This regulatory divergence should be reversed and further regulatory divergence must be avoided at an already disruptive time.”
Brexit Loan Scheme “discrimination”
In its paper ABFI has called on the European Investment Bank to end its discriminatory prohibition on distilled spirits producers from accessing the Irish Government’s Brexit Loan Scheme.
“ABFI welcomes the Government’s commitment to assisting businesses to deal with the Brexit threat,” she stated, “The expansion of sustainable financing measures for working capital and longer-term investment such as the Irish Government’s Brexit Loan Scheme, are vitally important. However, as this Scheme is part-funded by the European Investment Fund, the European Investment Bank rules apply, which means that the producers of distilled spirits have been excluded from applying for the Brexit Loan Scheme. We’re calling for an end to this unjustified discrimination.”
Commenting on last week’s Budget, Patricia Callan stated, “ABFI welcomes the €300m Future Growth loan scheme announced in Budget 2019. We’re calling on the Irish Government to ensure that this new loan scheme – or a separate bespoke strand – is open to Irish distilleries and spirits producers.
“We look forward to continuing our active engagement with the EU Commission and the Irish and UK Governments to ensure our priorities are addressed in the ongoing negotiations and to achieve the best possible outcome and least possible disruption for the all-island Irish drinks industry,” she concluded.
Over at SpiritsEurope, as Summit talks bear down, Ulrich Adam concluded, “Looking ahead to the future relationship, we call for the political declaration accompanying the Withdrawal Agreement to mandate the negotiators to achieve a deep and comprehensive EU-UK trade agreement securing tariff-free trade, fair competition and maintaining consumer confidence”.
He also called for the “urgent resolution” of the outstanding issues in the negotiations before the European Council meets later this week.