Of EU member countries, Irish businesses are by far the most threatened by a hard British exit from the EU. Not only is the UK Ireland’s second largest trading partner after the US, they‘ll also be faced with the only EU/UK land border. The introduction of complex or poorly defined trade regulations, as well as the prospect of border controls could have serious impacts on Irish businesses operating in, or exporting to, the UK.
The EU is beginning to take steps to protect the Irish economy and vulnerable Irish SMEs from any potential fallout by providing financial resources to aid them in the adjustment process. These investments promise to protect businesses that are likely to be hardest hit, such as Ireland’s thousands of agri-sector SMEs, who export over €11 billion in food and drink exports, making up over 37% of Ireland’s total exports.
New investment and loan options
Since November, the EU has taken significant steps to increase the amount of funds made available to Irish SMEs. Similarly, the Irish government and the banking sector are taking direct and targeted steps to make more investment available to businesses.
EU greatly expands loan options for businesses
The European Investment Fund (EIF), working together with the Strategic Banking Corporation of Ireland (SBCI) has more than tripled the lending capacity of the Competitiveness of Enterprises and Small and Medium-sized Enterprises (COSME) project. This year, the initial offering of €100 million was fully utilised by over 3,500 businesses, most of whom hailed from Ireland’s agricultural sector. Starting next year, EIF aims to triple that number, funding as many as 10,000 Irish SMEs with an enlarged offering of €330 million.
Additionally, in a separate initiative, the European Investment Bank (EIB) has also announced a €300 million lending scheme in cooperation with SBCI to help Irish SMEs tackle working capital issues. These moves by the EIB are significant in more than just their direct benefit to Ireland’s small business community. They are also a clear message that the EU does not intend to leave Irish SME’s holding the bill in the event that Brexit negotiations continue to go as poorly as they have in recent weeks.
Government and private sectors offer equity investment
At the beginning of the month, the European Commission signed off on an Irish Government scheme that made €10 million in equity investments available to SMEs in all sectors of the economy. This news comes only 2 weeks after a November announcement that the Ireland Strategic Investment Fund (ISIF) was backing a privately administered initiative to provide €250 million in equity investments for Irish SMEs.
It’s naturally attractive to invest in rapidly growing markets, and this is certainly a contributing factor to these growing financing resources. After all, Ireland has been the Eurozone’s fastest growing member for 4 years in a row. These investments come at a critical time, as SMEs make preparations for a worst-case Brexit scenario even as the economy is showing robust growth. By courting investors now, businesses can get the capital they need to take the edge off harder times in 2019. This is in stark contrast to the UK, where positive economic indicators are being celebrated, but little significant action to preserve or sustain that growth are being taken.
Irish entrepreneurs feel optimistic
While small business owners in Ireland still certainly face a number of challenges in the coming years, spirits remain high with surveys showing that approximately half of SMEs expect no adverse effects from Brexit. Approximately a third are expecting a negative impact, while the remainder are looking forward to positive effects to their business.
In a worst case scenario, a hard Brexit could result in the application of World Trade Organization tariffs on trade with the UK. This could make it unprofitable for many Irish exporters to do business in the UK, forcing them to take their business elsewhere. Doing that, of course, will require significant investment. Fortunately, the affected businesses have a wide range of investment options available to them, while also operating in a currently strong and growing economy. That makes this the perfect time to diversify into new markets and new countries.
In a best case scenario in 2019, they’ll be well positioned to make any necessary changes to remain competitive in their industries. The UK’s departure from the European Union will still have a profound effect on Irish SMEs, but that effect doesn’t have to be an existential threat. Better yet, entrepreneurs who take this opportunity to invest in their business’ future might well come out of it with more robust and competitive businesses than before.