€1.2 billion package to deal with Brexit – Donohoe
The Minister for Finance and Public Expenditure and Reform Paschal Donohoe has today announced an overall package of over €1.2 billion to respond to the threat of a no deal Brexit.
Delivering Budget 2020 in the Dáil, Mr Donohoe said some of these funds will be spread across a number of departments and agencies to increase the level of staffing, upgrade port and airport facilities and invest in information technology.
Mr Donohoe has said that Brexit is the most pressing and immediate risk to the economy and today’s Budget has been influenced by the increasing likelihood of a no deal scenario.
The Minister said today’s budget was without precedent and the economy is poised at a point between the twin risks of overheating and Brexit.
Mr Donohoe said a no deal Brexit will mean a slower pace of growth here.
He said that while employment growth will slow, the economy can still expect an extra 19,000 new jobs to be created next year.
An increase in tax revenue is also in prospect for 2020.
But he added that the rate at which new jobs may be created could put pressure on tax revenues.
“The Government is clear about the challenges posed by Brexit,” the Minister stated.
The Minister said the Government had been preparing for Brexit since the UK referendum in 2016 and so far it has enhanced capacity at the country’s ports and airports.
It has also provided training and financial supports to increase the country’s customs capacity and recruited 750 new staff in key areas.
Mr Donohoe also said the Government had made €600m available through the Future Growth Loan Scheme and Brexit Loan Scheme.
The Minister told the Dáil that while a no-deal Brexit is not definite, the Government stands ready if it does happen.
He said the Government has eliminated the deficit and are projecting a surplus of 0.2% of GDP.
“In the event that the UK leaves the EU with an agreement, we will continue to build on this surplus. And in the event of a no deal, we will intervene in a sustained and meaningful way to support jobs and the economy,” the Finance Minister said.
Speaking on RTÉ’s Drivetime Mr Donohoe said: “Where we are with Brexit constrains us from doing other things that you would normally expect to do at Budget time but my attitude is that we have to be proactive about choices and decisions that we’re going to make to ensure that we can strongly manage what we can control because there are other things we won’t be able to control.
“So it’s because of this that we decided to put together a Budget on the basis of a no deal Brexit being the most likely scenario and unfortunately I think events of only today show that that was the right decision to take.”
Central Bank urges no-deal Brexit checks with financial services firms
The Central Bank has urged customers of financial services companies to take steps to ensure those firms are ready for the consequences of a no-deal Brexit.
The regulator has also warned there will inevitably be some negative impact on consumers where firms have not prepared properly.
Gráinne McEvoy, Director of Consumer Protection at the bank, recommended that consumers read any communication from their financial services provider, contact them if they have not heard from them and do not deal with any unauthorised providers.
“With all the talk about Brexit over the last few years, there is a danger of Brexit fatigue setting in,” she said.
“But with a no-deal Brexit potentially just weeks away, now is the time to find out how it might affect the financial products and services you and your family use.”
“If you haven’t heard from your provider, contact them now to ask them what plans they have in place for you and what they are doing to plan for a no-deal Brexit.”
The bank said the deadline for the UK leaving the EU has been debated so much and extended so often, that people may naturally be tempted to conclude Brexit will not happen this time either.
But it said consumers should nevertheless be taking steps to protect themselves.
Much of the preparatory work has been done to ensure the financial system can withstand the shock of a no-deal Brexit, Ms McEvoy said.
Firms have been pushed to take action needed to protect consumers, while banks, insurers and other financial companies have been repeatedly reminded that they are responsible for putting plans in place, she said.
Companies have also been instructed to contact customers who might be affected by Brexit to let them know what they need to do.
Most have taken the necessary steps, she claimed, and have been in touch with their customers.
“However, there will inevitably be some negative impact on consumers where firms have not put suitable plans in place, failed to secure the necessary authorisation to continue to conduct business in Ireland, or chosen no longer to provide financial services here,” she said.
Financial services providers who are offering services here from a base in the UK under EU passporting rules, need to take steps to ensure they can continue to operate here, she said.
Such businesses should have contacted their customers by now to inform them about their plans to continue providing services in the market and if not, what plans they have put in place for the customers.
“If you have received such a letter or other communication, I would urge you to take the time to read it and consider its contents,” she said.
“If you have not heard from your service provider and are concerned, you should contact them and find out if you will still be able to use their product or services after 31 October and, if not, what plans they have in place for their customers.”
Legislation has been prepared to enable continuity in some services provided by UK entities in Ireland, such as insurers, for a limited period after a hard Brexit.
However, companies in this situation should have communicated this to their customers, Ms McEvoy said.
Selling financial products or services without the necessary authorisation is a criminal offence and the regulator has warned that appropriate action will be taken against such firms if they continue to conduct business in Ireland.
Some jobs and businesses may not be saved in event of no-deal Brexit – Taoiseach
The Taoiseach has warned that some jobs and some businesses may not be saved in the event of a no-deal Brexit at the end of next month.
Leo Varadkar also told the Dáil that there “hasn’t been an enormous take-up by businesses” of a number of schemes set up by the Government to help mitigate the impact of Brexit.
He was answering Dáil questions from Labour Party leader Brendan Howlin, who said the time had come for the Government to “give clarity on the specifics of Brexit preparations”.
Mr Howlin asked how much funding would be made available to sustain jobs in the short and medium term, and how much money would be made available from the European Union in the event of a no-deal Brexit in six weeks’ time.
“The British government was forced, as you know, to publish its Yellowhammer report on the possible effects of Brexit,” he said.
“Do you think, Taoiseach, it is now time for your Government to publish its own detailed clear analysis on the impact for every sector of our economy of a hard Brexit?”
Mr Varadkar responded that Budget 2020 was yet to be agreed and that the details would be announced in three weeks’ time. But he said the “prudent thing to do is to prepare the Budget with a pessimistic scenario”.
He said there would be a “substantial package” in the Budget to support businesses that are vulnerable, and that while most will come from the Government’s own funds, some will come from the EU.
“I need to be honest with people as well,” Mr Varadkar said. “If we end up in a no-deal scenario it will be damage limitation and there may be some jobs that can’t be saved and some businesses that regrettably can’t be saved.
“But we will put together a package that will be significant, that will be meaningful and will allow us to save those jobs and business that are viable in the long term and that have been made vulnerable as a consequence of Brexit.”
The Taoiseach also told the Dáil that the Government does not have any document similar to the British government’s Yellowhammer.
However, he added that it had produced “all that information already” in the Brexit contingency plan document published in July, and in the summer economic statement.
‘Palpable’ risk of no-deal Brexit remains – Juncker
European Commission President Jean-Claude Juncker said there was a “palpable” risk of a no-deal Brexit and progress on replacing the backstop could not be made to reach a deal until the UK submitted written proposals.
Speaking at the European Parliament, he said “the risk of a no-deal remains real” but that would be the choice of the UK government.
“I said to Prime Minister [Boris] Johnson that I have no emotional attachment to the safety net, to the backstop, but I stated that I stand by the objectives that it is designed to achieve,” he said.
“That is why I called on the Prime Minister to come forward with operational proposals, in writing, for practical steps which would allow us to achieve those objectives.
“Until such time as those proposals have been presented I will not be able to tell you, looking you straight in the eye, that any real progress has been achieved.”
The Minister for Business is to write to 220,000 companies all over the country to highlight the need for the them to take urgent action to protect their businesses against the risks posed by Brexit.
The letters will be issued through the Companies Registration Office and will tell firms about the supports that are available to help them get ready for the UK’s exit from the EU.
Heather Humphrey’s department will also be advertising the supports on various websites, including CRO.ie and RBO.gov.ie.
The moves are part of an intensification by the Government of efforts to coax businesses here to get ready for October 31, when the UK may crash out of the EU if no deal is reached in the meantime.
The Government is also drawing people’s attention to the ‘Getting your Business Brexit Ready – Practical Steps’ booklet which outlines 9 key steps that businesses should take to ensure they are fully prepared for a no-deal.
More information is available at www.gov.ie/brexit.
Online shoppers face changes and charges post-Brexit
Consumer buying goods online from the UK face immediate changes with increased VAT and import tariffs when the package is delivered by An Post to their home in Ireland, if Brexit goes ahead at the end of October.
On a visit to the An Post Mail Centre in Portlaoise, Minister for European Affairs Helen McEntee said she hopes it did not happen, but it is important that people are aware that buying online will change immediately if Britain leaves without a deal.
She also warned that there will be changes to consumer rights protection for all products bought in the UK after October 31.
“In the event of a no-deal Brexit, immediate changes will come in the form of increased VAT, import tariffs and changes to consumer rights protection for products bought from the UK. I hope this doesn’t happen,” Minister McEntee said.
“But it’s so important that people are aware that buying online will change when the UK leaves the EU and these changes will be immediate if they leave without a deal.”
Advice for consumers
Know where the company you are buying from is based
Always read the retailer’s terms and conditions carefully before buying, particularly around your rights to cancel the order, exchange or return the good
Before ordering from outside the EU, find out what VAT and import charges you may have to pay and how these payments can be made
Garret Bridgeman, Managing Director of An Post Mails & Parcels, explained in addition to two years’ Brexit planning, An Post is unique in having the end-to-end national and international mails expertise and global contacts to manage Brexit changes for private and business customers.
The company has been transforming its parcels business in line with rapidly growing e-commerce business.
Mr Bridgemen said: “It’s our job to manage whatever comes out of Brexit.
“An Post already handles hundreds of thousands of parcels every week from non-EU countries , the paperwork and where duty or tax charges are due, we collect them from our customers as part of our national delivery service.
“We also carry Irish goods to the world every day and we are working closely with Irish companies of all sizes on their international shipping and logistics.
“An Post is in daily contact with our colleagues in Customs, in Royal Mail and with all our national and international contract customers to ensure readiness for all possible Brexit outcomes.”
Fergal O’Leary, from the Competition and Consumer Protection Commission, said consumers have strong rights when buying within the EU, particularly if they change their minds or if goods are not delivered.
“These rights do not apply if you buy from a business outside of the EU. So it is important to prepare now for the possibility that following Brexit there will be changes to your rights if you are buying online from a UK based retailer,” he said.
“We have prepared helpful information for consumers about the impact Brexit could have on their rights when shopping online and booking a package holiday.
“At a minimum, before you buy you should be sure you know where the business is located, and if its outside the EU, check the terms and conditions on their website particularly the returns policy and any costs for returning goods.
“Make sure you are happy with these before you purchase anything.”
Businesses say Ireland is running out of warehousing space amid Brexit fears
Groups representing businesses have said Ireland is running out of warehousing space as retailers and manufacturers rush to stockpile amid growing fears of a no-deal Brexit on 31 October.
New figures from Savills Estate Agents show warehouses in Dublin have reached over 96% capacity.
A crash-out Brexit could result in new border checks for goods flowing between the UK and the EU.
Some businesses have been put under pressure to stockpile goods and components to avoid shortages in shops.
Owen Cooke, the chairman of transport group Independent Express, which runs The Pallet Network Business, says warehouses are close to capacity.
He says no new warehouses have been built since the collapse of the economy back in 2008.
“The economy has grown; it’s filled up the warehousing and the Brext situation would require dozens and dozens of warehouses like this one to cope with holding goods awaiting clearance and holding additional stock for import traders,” Mr Cooke said.
If the UK crashes out of the EU without a transition period, it could result in the possible interruption of supplies of food, goods and medicines moving through Irish and British ports.
Companies are expected to make efforts to increase their stockpiling between now and the latest Brexit deadline in October.
In the run-up to the last Brexit deadline in March, companies were able to stockpile, but this time around could be different.
Tom Thornton, Brexit spokesperson for the Irish/International Freight Association, says businesses must assess carefully whether they need to stockpile their goods.
He said: “There isn’t a whole lot of capacity there in the market for extra storage so if we try to layer on a whole new level of panic storage for Brexit-related goods coming towards October, there is going to be a huge problem.
“I think people need to stop and think and look at what tariff implications there are on their goods and just ask themselves do they really need to stockpile?”
Neil McDonnell, Chief Executive of the Small and Medium Enterprise Association, says the cost of warehouse space is rising due to the lack of capacity.
“We have no hard figures but we are hearing of not insignificant increases – of 5-10% increases – in storage cost.
“The amount of storage available is finite so it’s natural that there is going to be an element of supply and demand and it is to be expected that prices will go up.”
Mr McDonnell also said the Brexit deadline in October is coming at one of the busiest times of the year.
He said: “Just in the normal run of things you have preparations for Christmas and Halloween stock, so it’s going to be hard on the base case to get any type of storage space if you are a business that needs to get extra storage space.
“Also people have a concern having stocked up already in Q1, there was a significant cost to doing that. A lot of business are reluctant to do that a second time.
“But I think it’s clear from the political atmosphere, it’s more likely we will have a hard Brexit this time that we were in March.”
Meanwhile, Mr Cooke said he was worried about the uncertainty over a potential no deal.
“We would like to think we could prepare ourselves for anything coming down the road but we can’t because we don’t know what’s going to happen,” he said.
“If you talk to senior customs officials or Revenue Commissioners, they can’t – and they’re not in a position – to tell us what will happen.
“Will we have to do an individual customs entry for every shipment from the UK – we don’t know and they are not telling us.”
Brexit impacting skill requirements of companies; state training body
Brexit is having an impact on the skills requirements of companies here, according to the head of the state body tasked with upskilling the workforce.
Paul Healy, CEO of Skillnet Ireland, said the decision of our nearest neighbour to leave the EU was affecting the training and talent needs of businesses right across the economy.
“Brexit is pervasive. It has skills implications, whether that’s about marketing skills to forage out new markets, whether it’s about innovation, whether it’s about helping exposed businesses to become more lean and efficient. It has skills implications right across the economy,” he said.
Skillnet Ireland is overseeing the implementation of a new programme designed to help importing and exporting companies who will be impacted by the customs and trade implications of Brexit.
They’re being invited to apply for free training and financial supports from the government and industry partners.
Clear Customs provides free training over a 6 week period to ensure businesses can make compliant customs declarations.
“It’s one of a series of business support measures provided by government. The aim is to support smooth and efficient trade flows by helping businesses and the customs intermediary sector to develop the extra capacity needed to handle additional customs requirements,” Paul Healy said.
Eligible businesses can also apply for a financial support package to put towards the cost of recruiting or assigning new staff to customs roles.
The payment is worth up to €6,000 per employee up to a maximum of 10 employees per company.
“This is aimed at assisting firms with the staffing, IT and other costs associated with boosting the customs capacity within firms.”
Skillnet Ireland is seeking expressions of interest from businesses that wish to apply.
“We are urging firms that may have exposure, that may be trading with frequency and volume with, or through, the UK to consider their customs procedures to see if they can boost their in-house capacity. Could they train staff who could work on compliant customs declarations on behalf of the company?”
110,000 fewer jobs after no-deal Brexit – Central Bank
The Central Bank has warned of major job losses across the economy in the event of a no-deal Brexit.
In its latest Quarterly Bulletin, the Central Bank forecasts 34,000 fewer jobs by the end of next year and 110,000 fewer jobs over the next ten years.
It said: “A disorderly Brexit would present enormous challenges for the Irish economy, especially in the near term, and would result in a loss of output and employment compared to a scenario where the UK remained in the EU.”
It also warns that a disorderly Brexit would dramatically reduce economic growth and make consumers and businesses spend less.
There could be disruption at ports and airports, while Irish exports would be hit by a weak UK economy and a potentially large fall in the value of sterling.
The bank says that gauging the impact this could have on the Irish economy is “the most uncertain exercise” it has ever had to carry out.
The UK is set to leave the European Union on 31 October.
The bank said: “There would be heightened stress in financial markets and a potentially large depreciation of sterling.
“The deterioration in economic conditions and a more adverse outlook would cause firms and households to cut spending.
“It is likely that there would be disruption at ports and airports as border infrastructure is unable to cope with the new customs requirements, at least for an initial period.
“Imports would be affected with implications for firms through disruption to their production processes, and for households through the price and availability of consumer goods.
“Exports would fall due to an immediate and large reduction in demand from the UK and the fall in sterling.”
Tough Brexit talk fuels sharp drop in sterling
Sterling fell sharply yesterday as both candidates to become UK prime minister talked up their willingness to execute a hard Brexit during Conservative Party leadership debates.
On the eve of the Brexit referendum, it cost 76.5 pence to buy one euro. Now, with a hard Brexit fast approaching, a euro costs 90.22p and sterling looks set for further decline.
The Central Bank of Ireland said earlier this year that a hard Brexit could push the euro to 97p, and some economists have warned that parity – a one-for-one euro-sterling exchange rate – is a real possibility. Betting odds put Boris Johnson, who has said he could walk away without a deal, as 95pc certain to become Britain’s next prime minister, although the same odds show a 55pc chance the UK will still be an EU member at the end of this year.
Erik Norland, chief economist at the CME Group, the world’s biggest derivatives exchange, said sterling could be in for a dramatic autumn as the October 31 Brexit deadline looms.
“In other words, the downside potential for the pound becomes more acute as we enter the fall months,” Mr Norland wrote in a research report.
While the pound has fallen to levels not seen since 2017 against the dollar, hitting $1.2418 yesterday, it has traded weaker than 90p to the euro much more recently, and its move to 90.38p was the weakest since January this year. Even with signs of relative strength in the UK economy, which the European Commission expects to grow by 1.3pc this year and so outperform Germany, the pound has been weighed down by Brexit.
Any sharp moves in the pound and a fall towards parity will magnify the economic impact here.
Ryanair and the ferry operator Irish Continental have already warned of the impact of Brexit, and even though a weaker pound would push inflation here lower in the short term, there is a risk that the negative supply shock could cause prices to push higher, eroding wage gains in Ireland.
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