Image: © Björn Braun 200%/Stock.adobe.com
Business owners paralysed by a fear of the unknown.
The UK’s looming departure from the EU with no-deal Brexit in sight is forcing large numbers of companies to either cancel or postpone their expansion plans, according to AIB.
According to the latest AIB Brexit Sentiment Index for Q4 2018, 35pc of SMEs in the Republic of Ireland and 40pc in Northern Ireland that had planned to expand or invest in their business have put their plans on ice.
‘We continue to encourage SME customers to plan for a hard-Brexit scenario’
– CATHERINE MORONEY
The report found that 68pc of SMEs in the Republic of Ireland believe that Brexit will have a negative impact on their business in the future, up from 63pc in Q3 2018. By comparison, 62pc of SMEs in Northern Ireland believe Brexit will have a negative impact on their business, remaining unchanged from Q3 2018.
Fail to prepare, prepare to fail
Despite this, 52pc of SMEs in the Republic and 56pc in Northern Ireland have yet to begin planning for Brexit.
The hardest-hit sector so far is tourism, with 25pc of firms in this field in the Republic reporting lower sales and 20pc reporting higher cost of sales.
“As the research shows, clearly businesses in the Republic of Ireland are concerned about the outlook for their sector as a result of Brexit, with 51pc concerned that it will have a negative impact,” said Catherine Moroney, head of business banking at AIB.
“Despite this, formal planning remains low at 8pc. This is particularly concerning as Brexit, whether hard or soft, will inevitably result in the need for increased working capital to manage businesses’ cost pressures or possible price inflation should Brexit eventuality result in the UK leaving the EU customs union.
“Despite this, the majority of SMEs (64pc) feel that their working capital requirements will stay the same in the next three years, whilst only 26pc feel that they will require additional working capital as a result of Brexit.”
Moroney urged businesses to act now as Brexit quickly approaches.
“We continue to encourage SME customers to plan for a hard-Brexit scenario and to consider the impact that this would have on their working capital requirements, and in particular on their supply chain and sub-supply chains.”
AIB has created a free Brexit Ready Check tool to help firms understand their business exposure to Brexit.
“The survey results for Q4 show a significant rise in the number of SMEs in the Republic of Ireland reporting that Brexit is now starting to impact on their business at 32pc, up from 25pc and 21pc in the previous two waves of research,” said AIB’s chief economist, Oliver Mangan.
“Furthermore, concerns continue to grow from already high levels about the impact on business in the future of Brexit and its wider economic effects. Some 35pc of investment plans in the Republic and 40pc in Northern Ireland have been postponed or cancelled due to Brexit, with another 13pc of plans under review. Meanwhile, more than half of the SMEs in both the Republic and Northern Ireland have not commenced planning or done any investigative work in relation to Brexit.”
