The first thing to know about a no-deal Brexit is that nobody knows anything about what will happened under a no-deal Brexit. When your strongest card is ‘speculation’, it makes preparing for the best outcome even more of a gamble.
This being the case, the Drinks Industry Group of Ireland, a body that unites the beer, wine, spirits and cider sectors in a common protective cause, has no crystal ball to gaze into nor can it offer any great illumination here.
“The levels of uncertainty around Brexit make it difficult to prepare for what’s to come,” agrees DIGI’s Director Rosemary Garth.
Part of IBEC, the DIGI was established by Rosemary who also plays a role as Communications and Corporate Affairs Director at Irish Distillers Pernod Ricard.
All she does know is that, “A no-deal Brexit will have a significant impact on the industry and there’s no doubt that industries, especially our own, need to prepare. This will require investment to Brexit-proof industry and supplies.
“For example one of the biggest difficulties facing us is cross-border shopping. A recent revenue survey comparing alcohol prices in Ireland and the North showed significant difference in the price of alcohol, with Ireland coming out on the more expensive side. This is a stark reminder of the challenges that we’re going to come up against and it’s important that we don’t lose sight of how difficult this could potentially be. We need to prepare for all outcomes.”
But how can individual players – large and small – in the industry do that?
In acknowledging that it’s hard to plan and legislate for something as nebulous as Brexit, she nevertheless feels that since short-term disruption is likely at the very least, the Government should be helping to make doing business easier, particularly for traders and companies outside the capital.
“Reducing operational costs like alcohol excise tax will help businesses prepare for a downturn and provide the opportunity for much-needed local investment,” she believes, “If the Government is serious about helping rural Ireland this should be their default policy. Brexit simply adds urgency.”
Right now she believes that the best thing we can do as an industry is to continue to engage with the Government to ensure that Budget 2020 and any Brexit policies going forward are designed to protect jobs and maintain a competitive offering within the industry.
“It’s not an easy task and we understand that the Government has some tough decisions to make in the weeks to come” she states, “but it’s crucial that we’re in conversations with them and that all factors are being considered.”
She envisages small drinks businesses that depend on any kind of trade with the UK, particularly if they’re located in rural Ireland and close to the Border, as being likely to be hit hardest.
“That’s why we believe it’s vitally important that the Government helps limit the damage of Brexit fallout by reducing the high alcohol excise tax burden.”
Crystal ball or not, one can’t help but wonder what will be the most likely outcome for the Irish drinks industry of a no-deal Brexit.
Again she points out, “It’s impossible to predict the outcome of any type of Brexit let alone the no-deal kind. So far, the answers have proven equally elusive for Leinster House, Westminster and Brussels.
“What’s likely, from our perspective, are short-term delays at UK borders until a long-term solution is agreed.”
If vehicles are stopped and inspected, expect disruption to supply chains, delaying imports, exports and ultimately manufacturing.
“While larger businesses may be in a better position to be able to absorb these costs, at least for a while” she says, “small businesses, particularly ones that are already operating on the fine line between red and black, could be severely impacted.
“If Sterling sinks to parity, we’re also likely to see a further decline in British tourism which is another serious issue for rural businesses.”
UK Tourism decline
The decline in British tourist spend is nothing short of worrying for the industry as a whole, she agrees.
“The UK is Ireland’s single biggest tourism market. As Sterling approaches parity with the €uro British tourists are much more likely to view Ireland as an expensive place to holiday and go elsewhere or stay at home. If they do visit Ireland, they’ll spend less. The figures showed this less than a year after the referendum result.
“While places like Dublin can shrug-off this decline because of the greater mix of international visitors, many rural parts of the country, where British tourists are large contributors to local drinks and hospitality businesses, will suffer.”
The recently reported fall in rural pub numbers, the fact that 70% of drinks manufacturing jobs lie outside Dublin and the latest Irish Examiner ICMSA poll finding that 86% of respondents believe that this Government is too focused on the capital (rising to 93% of those between 55 and 64) suggests that more could be done by the Government for business beyond the Pale.
She’d not disagree.
“Many rural drinks businesses, pubs particularly, are facing a fight for survival if they’re not engaged in one already,” she says, “The Government needs to stop making that fight harder.
“Minister Donohoe can help by making it easier to keep the lights on and the doors open. By reducing excise tax, for example, the Government would be giving drinks businesses the breathing space they need to trade more successfully and better prepare ahead of any Brexit-induced downturn.”
Drinks industry health-check
Brexit apart, how does Rosemary rate the current general health of the drinks industry?
“It’s a tale of two industries in many respects,” she answers, “At the top, you have the new distilleries and breweries, of which there are now at least 24 visitor centres in Ireland. These visitor centres have seen an increase of 241,294 visitors since 2016. Not only are they the industry’s post-recession success stories, they’ve helped keep the entire country’s manufacturing sector vibrant and innovative.”
However she continues, “At the bottom are the rural pubs. They’ve suffered as a result of the crash and local migration to cities.”
They pay unsustainably large sums in excise tax, VAT and insurance. Brexit could reduce their market further.
A fifth of rural pubs have shut since 2005, compared to just 1% in Dublin.
“Considering all the economic, commercial and legislative forces working against them, that’s hardly surprising,” she feels, “The drinks industry is one of Ireland’s true success stories. We’ve created brands that are internationally recognisable and that play a significant role in promoting Ireland abroad and in our tourism product.”
Yet, as she points out, “Although Ireland produces some of the world’s most famous whiskey and beer products, it’s cheaper, in terms of excise tax, to buy them in virtually all other European countries.”
In all this one gets the distinct impression that the Government displays an ambivalent attitude to the drinks industry at best. Happy with export sales, it seems similarly content to denigrate the industry’s performance on the home front.
“The current legislative mood suggests as much,” she offers, “Excise tax remains extremely high which deceases profit margins for producers and retailers and arbitrarily punishes consumers. Last year’s VAT hike, which we objected to, has compounded these issues.
“Aspects of the Public Health Alcohol Act lack an evidence base yet will restrict and demonise the industry.”
With the drinks and hospitality industry facing Brexit and domestic legislation, both of which will curb sales significantly, one gets the impression that positive action by the Government, not negative words, would go a long way towards helping maintain employment here at a time when we’ll need it more than ever.
Rosemary Garth’s resumé
After studying economics in university, Rosemary Garth worked in Brussels for a number of years, starting in the European Commission then moving on to represent the Irish beef and dairy sectors. Returning to Dublin she took up a role in IBEC working for the prepared consumer foods sector before taking on the role as Director of Food and Drink Ireland. The drinks sector beckoned and she established the Alcohol Beverage Federation of Ireland (now Drinks Ireland), bringing together for the first time in any country the beer, wine, spirits and cider sectors. Alex Ricard approached her to work for Irish Distillers in 2011 and she’s been Communications and Corporate Affairs Director ever since.