According to new figures released today by the Drinks Industry Group of Ireland (DIGI), the impact of a hard Brexit on the drinks and hospitality sector alone could cost the Exchequer as much as €135 million in lost revenue a year.
The estimate was published in a statement, The Economic Impact of Brexit on the Drinks and Hospitality Sector, published by DIGI with supporting analysis by DCU economist Anthony Foley - an update on the 2017 Economic Impact of Brexit on the Drinks and Hospitality Sector Report, authored by Foley.
The lost revenue would result from, according to the survey, reduced drinks exports to the UK, reduced British tourism, and an increase in cross-border shopping.
A Hard Brexit
“A hard Brexit will inevitably lead to reduced revenue, business closures and job losses. In some areas, where the industry is the primary employer, we are looking at the possibility of a recession-type effect, whereby entire communities suffer because of a drop in product exports or tourist numbers,” said Rosemary Garth, Chairperson of DIGI and Director of Communications at Irish Distillers.
Drinks exports to the UK have already decreased, dropping by 11% in the first half of 2018 alone, against a 7% decrease from 2015-2017.
Many Irish drinks products are dependent or heavily reliant on the British market, with more than 70% of all cider exports and 43% of all beer exports destined for the UK.
Difficulty accessing the British market due to new tariffs, an increase in wait times at the border, or other costly barriers will eat into the margins of drinks producers, especially micro-breweries and distilleries.
Excise Tax
“To avoid this kind of scenario, the Government needs to make it as easy as possible for drinks and hospitality businesses to trade and grow. A hard Brexit alone is tough—a hard Brexit in a market with high excise tax is even tougher. High taxes mean more money is spent covering overheads before anything can be invested in productive outputs, like new premises, new products, or new staff,” Garth continued.
Despite the high excise, the drinks and hospitality industry has been one of Ireland’s greatest post-recession success stories, exporting €1.3 billion worth of goods every year. While the number of total manufacturing enterprises has grown by just 1% since 2008, the number of drinks manufacturing enterprises has grown by 105%.
However, the report adds, a hard Brexit in a high excise environment is likely to restrict further growth and jeopardise the future of smaller drinks and hospitality businesses.
“For smaller producers with limited product ranges, a bump up in excise can cost thousands of euros. That is enough to eat into their profit margins and potentially shutter them completely,” Garth concluded.
“As has so often occurred in this country’s history, when the UK sneezes, Ireland catches a cold. We are asking the Government to boost this industry’s immune system now by reducing the excise tax on alcohol.”
© 2018 Checkout – your source for the latest Irish retail news. Article by Aidan O’Sullivan. Click subscribe to sign up for the Checkout print edition.
