EXPORTING TO THE UK? A new guide for Irish business post UK Referendum - For more information please visit: enterprise-ireland.com/ukexporthelp ...
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EXPORTING TO THE UK? A new guide for Irish business post UK Referendum. For more information please visit: enterprise-ireland.com/ukexporthelp
INTRODUCTION
Julie Sinnamon 4
ONTENT
MANAGING CURRENCY RISK
John Finn 6
BUSINESS PLAN
Colm Mac Fhionnlaoich 8
LEAN BUSINESS
Dr Richard Keegan 12
UK OPPORTUNITIES
Marina Donohoe 16
INNOVATION
Gearoid Mooney 20
SUPPLY CHAIN
Garrett Cronin 22
LEGAL ISSUES
Sean Ryan 24
TAX
Daryl Hanberry, John Stewart & Tom Maguire 28
DIVERSIFYING INTO NEW MARKETS
Eddie Goodwin 30
CONCLUSION
Kevin Sherry 32
OFFICE LISTINGS
Appendices 34
This guide is for general information only and should not be
used as a substitute for consultation with professional advisors.
SECTION 1 — INTRODUCTION
INTRODUCTION
Julie Sinnamon, CEO identifying openings in financial heavily dependent on exporting
Enterprise Ireland services, aerospace, health, to the UK, that the Government
infrastructure and more. has a strategy for ameliorating
T he UK vote to leave the
European Union raises
many important issues for
That said, over recent years,
we have been working with
companies to help them
the immediate and longer-term
effects of the UK referendum.
And at Enterprise Ireland, we
Ireland’s exporters to Britain. diversify globally. are playing our part.
But it is important to bear in We recently announced This guide is part of that
mind that there will be a period record export results by process. Here we publish expert
of negotiations which will last client companies, breaking guidance on what businesses
at least two years before any the ¤20bn threshold for the should be thinking about and
trade agreements are put first time. This represents an doing to address the short- and
in place. Further, the British increase of ten percent on the longer-term implications of the
government has indicated that previous year. UK’s vote to leave the European
Article 50 of the Lisbon Treaty, Union.
which must be triggered to In terms of the UK, we have
begin the talks, will not be actually seen more client On the day the UK referendum
invoked immediately. companies diversify and as result was announced, we
a result, the proportion of published 5 Pillars of Enterprise
The UK is and will remain a key exports to the UK has declined Ireland Supports for Irish
market for Enterprise Ireland from 45 per cent in 2005 to 37 Exporters to the UK, www.
clients who recorded over percent last year. enterprise-ireland.com/5pillars
¤7.5bn in exports last year.
But contingency plans and This strategy document will
This will continue to be the near-term responses to the be supported in the coming
case and we will be continuing UK vote are needed. The legal weeks and months with more
to actively help companies status of contracts, currency comprehensive information
deepen and strengthen their risk management, tariffs, which will be available in
presence there by helping staffing and supply chain are hardcopy, online and delivered
them to be as lean and as among the matters exporters through seminars. Keep an
innovative as possible. must consider. That is why we eye on the dedicated UK
have developed this guide. Export section on our website
We are advising companies to (www.enterprise-ireland.com/
seek new UK opportunities. I want to reassure anyone UKexporthelp) and Twitter
Our London office is active in whose business or job is feed for updates. We have
4
“I want to reassure anyone whose business or
job is heavily dependent on exporting to the
UK, that the Government has a strategy for
ameliorating the immediate and longer-term
effects of the UK referendum”
also set up a dedicated email:
ukexporthelp@enterprise-
ireland.com and an Enterprise
Ireland phoneline: 01 727 27 27
for any queries exporters may
have.
So what should you be
thinking about if you are
impacted by the UK vote? In
this guide, we have brought
together a range of expert
views to help you.
For instance, managing
currency risk is an immediate
issue for exporters to the UK. contract, company, and information about reassessing
John Finn, MD of Treasury employment law. Seán Ryan business plans.
Solutions gives guidance on of Eversheds has guidance
what you should be looking for on handling these complex As you will be aware, the UK’s
when dealing with your bank, issues. referendum result has created
professional advisor, supplier uncertainty in the market and
or client. There are also strategies to the situation is likely to remain
be considered around new fluid for some time to come.
Another impact which could taxes and tariffs affecting
arise quite quickly is changes exporters and secondary During this time, Enterprise
companies or clients may producers. Daryl Hanberry, Ireland will continue to
make in respect of their supply Tom Maguire, and John support our exporters to the
chain and routes to market. Stewart from Deloitte share UK with a comprehensive
Garrett Cronin of PWC outlines their thinking. response which will evolve as
some of the considerations. the situation develops. And
We also have advice on our network of 32 offices
Looking a little further down improving competitiveness around the world will be
the line, there could be and diversifying into new working to seek out new
substantial legal implications markets from Enterprise market opportunities for
to a UK departure such as Ireland specialists as well as clients.
5
SECTION 2 — MANAGING CURRENCY RISK
MANAGING
CURRENCY
RISK
John Finn, Managing Director Wednesday. In the case of full participation in the upside
of Treasury Solutions, answers forward foreign exchange should it arise.
some key questions related to contracts, a rate can be agreed
management of currency risk. today to apply to receipts on a Some banks sell a
future date. combination of an option
WILL MY BANK PERMIT ME and forward contract called
TO HEDGE MY FOREIGN The advantage of this a participating forward. This
CURRENCY EXPOSURES? instrument is that an exporter allows participation in a fixed
For an exporter to hedge can bring certainty to the percentage of the upside.
its currency risk, in the first amount of euro that it will However it does have a cost.
instance, it must first have a receive in return for a specified Again, these should not
foreign exchange line of credit amount of sterling at this be purchased without full
from the bank. This must be stated future date. knowledge and understanding
formally sought in advance of what is involved.
prior to its use and, from the The primary disadvantage is
bank’s perspective, it is the that there is no opportunity to HOW FAR FORWARD CAN I
equivalent of making a loan share in any upside in currency HEDGE?
application, ie it requires credit movement. Most banks will have a
approval. maximum time period for
In order to achieve that which they will sell forward
WHAT INSTRUMENTS WILL objective, it is possible to contracts to their customers.
THE BANK PERMIT ME TO purchase an instrument known This needs to be ascertained
USE IN ORDER TO MANAGE as a foreign exchange option. now. In general, most banks
FOREIGN CURRENCY RISK? However caution is urged; it is will not provide forward
For the most part, this is an extremely useful instrument contracts for periods beyond
restricted to either spot or to utilise in managing foreign 12 months.
forward transactions. The exchange risk, but it needs to
former implies selling sterling be constructed appropriately. WHAT TERMS AND
at the current market rate. In essence, it is an insurance CONDITIONS APPLY?
product for which the In some cases, the banks may
As a general rule, spot deals purchaser pays a premium, require security to be provided
settle in two days’ time, ie which protects it against in the form of charges over
agree a rate on Monday a worst possible (defined) assets or guarantees. If the
with funds transferring on outcome whilst permitting exporter is already a borrower,
6
“I would strongly urge paying close
attention to the terms and conditions
attaching to any new borrowing
agreements, as I would expect banks to
tighten up significantly in this area”
it is probable that the bank WHAT ARE THE WIDER FINANCIAL
would simply extend any IMPLICATIONS ASSOCIATED WITH
security that it already had over CURRENCY RISK?
the foreign exchange line. It The obvious effect of weakening sterling is
may also monitor the extent to adverse consequences for both profitability
which the currency contracts and cash flow. Immediate actions that could
are showing a “profit” or be taken include:
“loss” at a point in time and
either limit this or seek some — Calculation of the exchange rate at which
collateral, which may include UK sales are no longer profitable.
cash, if the loss – although only
theoretical – extends beyond — Rerunning financial forecasts at current
the defined amount. exchange rates and assessing the
projected outcomes.
Finally, some banks may
require the completion of — Where financial covenants are part of
what is known as an ISDA your borrowing agreement, ensure that
agreement. This is quite adverse foreign exchange moves do
a complex document to not materially and negatively impact on
complete for the first time, and compliance with them.
proper advice should be taken
in its construction and prior to — Please note that where companies with
signing it. material amounts of UK exports intend
to refinance their banking facilities in the
One final point to note in coming months, a significant amount of
hedging foreign currency risk sensitivity analysis will be required in any
is that there are non-bank financial projections provided to banks.
providers of such services who
tend to be less prescriptive in I would strongly urge paying close attention
their dealings. However, many to the terms and conditions attaching to any
borrowing agreements now new borrowing agreements, as I would expect
specify that the borrower may banks to tighten up significantly in this area
only conduct foreign currency as a consequence of the UK vote to exit the
transactions with the lender. European Union.
7
SECTION 3 — BUSINESS PLAN
BUSINESS
PLAN
A well-thought-out business your target market(s). your plan. List any strategic
plan is crucial for responding advisors relevant to your
to any significant change for A business plan is an iterative, company’s plans. Consider
businesses created by the UK’s live document and should be whether you have the
vote to leave the European reviewed regularly, especially resources to deal with the new
Union, writes Colm Mac if you are in a position where circumstances?
Fhionnlaoich, Manager, High you are diversifying into a new
Potential Start-Ups, Enterprise market. Enterprise Ireland is
Ireland. intensifying its work with
STRATEGY clients exporting to the UK
E very successful business
is driven by a solid
operational business plan.
Firstly, you need to do a
strategic analysis of your
business. Consider your
by providing support to
improve their competitiveness
in the market through our
With challenges arising for product / service by putting management capability and
Irish exporters to the UK - yourself in your customers’ development programmes.
some foreseeable, others shoes. Ask yourself what
imponderable - it is crucial problem does your offering YOUR MARKET
for relevant companies to solve? Provide a clear, concise The market is the next
reconsider the development explanation of your Unique segment in your business plan.
of all aspects of the business. Selling Point and do a SWOT Extensive market research is a
analysis to identify the must when assessing a new or
Having a clear business plan is strengths and weaknesses changed market.
the first step for any company of your business, the
faced with a significant change opportunities in your target Do a deep dive on your target
in circumstance. Undertaking market, and the threats to the customers and channels to
this will help your company viability of the project. State market. Consider trialing your
identify any new barriers for clearly your short-term and product / service to potential
your business and any new long-term objectives. customers if this is your first
opportunities that may arise. venture into the market. Once
YOUR TEAM you have done an analysis of
When reviewing your business The next step is to look at your the target market consider
plan, you will need to assess team. You will need to outline whether you need to make
the competitive strength of the details of your management any changes to your offering
company, and your resources team, and realistically assess to deliver a solution to these
and capabilities in relation to their ability to deliver on customers.
8
“Having a clear business plan is the
first step for any company faced with a
significant change in circumstance”
Now more than ever, competitors thoroughly will data? Can your team interpret
Enterprise Ireland is focused help you do this. and analyse the financial
on supporting clients to performance of the company?
diversify into new markets; Is there a pipeline-driven, Does your company have
and our overseas teams repeatable sales process the ability to fund its growth
will provide increased in place? A focus on lead- internally or can it access the
internationalisation supports generation and an action- required additional funding
to assist you in evaluating new orientated plan for each from external sources?
market opportunities. market is key in this process.
In these uncertain times, it is
Once you’ve done your RESEARCH & DEVELOPMENT more important than ever to
research and have validated Your business plan will understand where you might
that your product / service need to address Research & adjust your business plan to
is in demand in your target Development. Innovation is account for any changes to
market, you will need to look essential for your business to your UK market and whether
at your Sales & Marketing be competitive. Do you have diversification into another
strategy. the structure and processes in market is a suitable strategic
place to ensure your products response moving forward.
There are three key / services are competitive
components in the Sales & in export markets? Look at A Business Plan template is
Marketing mix that you need opportunities for ongoing available on
to consider here. development of tailored www.enterprise-ireland.com
products to meet local market
Operating in a new market or segment-specific needs.
– do you have boots on the
ground there or at least a Your business plan will
local partner to deal with not stack up without a
customers, translations, etc? close analysis of financial
projections. Ask yourself,
Spend time honing your does your company have clear
Customer Value Proposition. processes in place to ensure
Understanding feedback your offering is delivered
from your customers on the efficiently to maximise profit?
benefits of your product / Can your company produce
service and analysing your accurate and timely financial
9
10
“Enterprise Ireland is intensifying
its work with clients exporting to
the UK by providing support to
improve their competitiveness
in the market through our
management capability and
development programmes”
11SECTION 4 — LEAN BUSINESS
LEAN
BUSINESS
Dr Richard Keegan, Manager Lean principles were first PEOPLE
at the Enterprise Ireland developed by Toyota in Experience shows that human
Competitiveness Department Japan in the 1950s to make resources are central to
outlines procedures for production processes more successful Lean processes.
achieving efficiencies in your time and cost-efficient. That means being fair to staff.
business. It also means being firm: once
It is very much about you decide how things should
C ompanies challenged by
the UK’s vote to leave
the EU should review their
technology and engineering
but it is not confined to that.
It runs through the whole
be done, everyone must stick
with it. That also means being
consistent with how you deal
business models as one part of value chain with the aim of with people, problems and
a strategy for coping with any outputting a better offering to issues.
depreciation in sterling and the customer at a better price.
any loss of competitiveness Much of people’s time in
arising from a UK departure While first developed with business is spent handling the
from the Single Market. manufacturing in mind, Lean “day job”, doing what needs to
is now used widely in services be done, or fighting fires. Lean
With margins potentially in both the private and techniques ask the question,
squeezed, managers should public sectors. Management “What are we trying to achieve
consider ways of reducing philosophy, workforce here?”. This helps the business
their cost-base by reviewing culture and human resource see what is actually being
processes and procedures. development are all part of the done – the difference between
Lean approach. the question and the answer is
At Enterprise Ireland, we the gap to be bridged.
work with clients to help them Product development
increase performance using and design, purchasing, Managers should look closely
what are called “Lean” tools manufacturing, administration, at processes, go to the place
and techniques. Perhaps the logistics and sales all come where work is done, see what
most important thing to bear under review with the aim is happening. It will often be
in mind about developing a of working more efficiently quite different to what you
Lean business is that human from the shop floor to the think. That means there is a
resource capacity and boardroom to the point gap in your understanding.
capability is a thread that runs of delivery and after-sales
through the entire process. service. You need to know the
12“Experience shows that human resources
are central to successful Lean processes.
That means being fair to staff. It also means
being firm: once you decide how things
should be done, everyone must stick with it”
underlying principles that
affect the outcome then think
about how you can improve
things. Can you “put out the
fires” once and for all?
QUESTIONS
In carrying out this
assessment be sure the
following five questions can
be answered: What are you
doing? How are you doing it?
Why are you doing it? Who is
going to improve it? When?
Having taken this approach, —— EFFORT identifying the “Seven
whatever you do, do Look at the elements Wastes”: Defective Service,
something. You do not have to involved in getting work Over Production, Inventory,
make it perfect, just better. done. Be sure you know Motion, Processing,
the value and need for Transportation and Waiting.
There are three key areas of every step along the way to Today we recognise a
focus in developing a Lean fulfilling a particular task. significant eighth waste,
Business: time, money and people, ie not utilising their
effort. It is also necessary —— MONEY capabilities to improve the
to benchmark against your Use it as a metric for business.
competitors on an ongoing identifying wastage and
basis. putting a value on issues, There are many more
problems and delays. wastes than the core eight
—— TIME and there is some variation
Examine how long it takes WASTE between manufacturing
to carry out particular tasks Wastage is a key area for and service businesses, but
such as: processing an identifying savings. Declare these are a good starting
order, dealing with a claim war on waste. Taichi Ohno point on a Lean journey to
or providing a service. of Toyota is credited with competitiveness.
13SECTION 4 — LEAN BUSINESS
team may fail, with ongoing
negative repercussions on
future improvement activities.
Enterprise Ireland provides
clients with access to the
best SME benchmarking
systems and data in the world
through our Lean Service
Benchmarking tool, which
gives an objective view of the
competition and the client’s
strengths and weaknesses.
We also have checklists and
other tools for the type of
work-practice audit that could
make the difference between
remaining competitive in the
UK and being priced out of the
market.
In fact, many exporters are
already employing Lean
techniques to address the
threat to the bottom line
caused by currency fluctuation.
Enterprise Ireland Lean
programmes have helped
companies in sectors such as
agri-business, manufacturing,
engineering and services to
improve their competitive
position.
Often, companies develop
simplified and standardised
ways of working that are not
just more efficient but easier
for implementation, training
and monitoring. For case
studies, see: www.enterprise-
ireland.com/lean
When implementing Lean people to feel that they have
processes, it is important to contributed to its solution and Enterprise Ireland clients that
identify a problem or issue also needs to be achievable have not availed of the Lean
that is both challenging and within a reasonable timescale. Business Programme, can do
achievable. It needs to be If the problem or issue is too so through their Development
challenging enough to allow big or too difficult, then the Advisor.
14“At Enterprise Ireland, we
work with clients to help them
increase performance using
what are called “Lean” tools and
techniques. Perhaps the most
important thing to bear in mind
about developing a Lean business
is that human resource capacity
and capability is a thread that
runs through the entire process”
15SECTION 5
3 — UK OPPORTUNITIES
UK
OPPORTUNITIES
Whatever happens, the UK 4. National Health Service’s laundering and data handling.
will continue to be a key “Five Year Forward View”
export market, writes Marina 5. Water Market This is a sector where
Donohoe, Enterprise Ireland 6. Financial Services/Fintech Enterprise Ireland has been
Director UK and Northern 7. Aerospace working for many years and as
Europe. any new opportunities unfold,
FINANCIAL SERVICES/ we are well-placed with high-
D espite understandable
concern over the UK’s
vote to leave the EU, our
FINTECH
With over 250 foreign banks;
expertise across retail banking,
level contacts to introduce our
clients to key decision makers.
nearest neighbours will insurance, capital markets, AEROSPACE
remain a natural first market bonds, equities, currency, UK Aerospace Industry
for Irish exporters due to payments, regulation; and captures 17% of the global
proximity, a shared language allied sector-specific advisory, market and is considered
and similar business cultures. legal and professional services, the largest player in Europe
the breadth of UK Financial and second globally after the
While strategies to offset Services sector is huge. The US. Turnover in 2015 rose by
whatever consequences sector employs 2.2 million £1.9bn to £31.1bn.
arise from the UK vote are people in the UK.
advised, businesses in Ireland Enterprise Ireland’s
would be missing a trick It is important to recognise participation at the
if they discounted the UK that the sector is a truly Farnborough Airshow in July
market. In fact, Enterprise global centre of expertise, 2016 is a key initiative to
Ireland has determined and one where there will support Irish companies secure
seven key opportunities for continue to be opportunity business in this growth sector,
Irish companies based on for fintech companies after and with Ministerial attendance
government initiatives and any UK exit from the EU. it will highlight Irish capability
evidence of sectoral growth: Opportunities will also emerge in this growth sector.
during any exit negotiations.
1. The National Infrastructure Particularly for legal, advisory, Aerospace is vastly
Delivery Plan professional services and IT outperforming the wider UK
2. The Northern Powerhouse solution providers, as firms economy with productivity up
Agenda may seek new structures 30% over the past five years,
3. Scottish Government around regulation, compliance, compared with the national
Investment Plan currency handling, money average of 2%. Through
16“While strategies to offset whatever
consequences arise from the UK vote
are advised, businesses in Ireland
would be missing a trick if they
discounted the UK market”
the Aerospace Growth
Partnership (AGP), industry
and Government are working
together to ensure the UK is
well placed for future growth
opportunities. Investment
in skills, technology and
the competitiveness of the
UK supply base is making a
difference.
NATIONAL HEALTH SERVICE
(NHS)
In 2014 the NHS outlined
their proposed capital outlay
of £8bn by 2020 towards
transforming the NHS led by
improved efficiency. Within —— £750m updating remote opportunities with investment
the strategic plans, key areas care such as those shown in the
of interest, and highly relevant —— £400m digitising the NHS table overleaf.
to our Connected Health/ (Apps/Telehealth)
Medical Devices/Services —— £250m on data for NORTHERN POWERHOUSE
clients include: outcomes research The UK government intends to
spend £134bn over the period
Several initiatives are NATIONAL 2016-21, 32% of which will be
underway to win business INFRASTRUCTURE DELIVERY spent in Northern England.
for our clients including a PLAN
report which will shortly be The NIDP envisages £483 The goal of this initiative is
released mapping out key billion of investment in over to rebalance the country’s
opportunities. 600 infrastructure projects economy and establish the
and programmes in all sectors North as a global powerhouse.
—— £1.8bn to create a paper- across the UK, to 2021 and Cities include Liverpool,
free NHS beyond. Irish companies are Manchester, Leeds, Sheffield,
—— £1bn on cyber security/ operating in these sectors Newcastle and Hull, as well as
privacy already and there are huge Cumbria, Lancashire, Cheshire,
17SECTION 5 — UK OPPORTUNITIES
No. of
Projects Billions North Yorkshire and the Tees
Valley.
Communications 6 £6
Energy 167 £256 The opportunity lies in
supporting initiatives in
Flood 29 £4 road, rail, freight, aerospace
Science and Research 32 £5 and skills development.
Key deliverables include
Transport 329 £134
improving freight
Waste 10 £0.5 capacity, and road and rail
infrastructure. For example,
Water 29 £19
the HS2 high-speed train
Economic Infrastructure Investment Total 602 £424.5 network will cost £55.7 billion.
Source: HM Treasury and Cabinet Office (2016)
SCOTTISH GOVERNMENT’S
INVESTMENT PLAN
Enterprise Ireland continues
to have a strong geographical
focus and plan within the
Scottish market. Holyrood
has highlighted the strategic,
large-scale investments they
intend to take forward within
a number of key sectors over
the next 10 – 20 years.
Key areas of investment which
will provide opportunity for
clients include Energy, Water
and Housing. For instance,
the Housing Supply budget
has been set at £690 million
for 2016-17. This will deliver
8,000 - 9,000 affordable
homes, 28% more than the
average output in the last two
years.
WATER MARKET
OPPORTUNITY
UK water utilities are planning
a total expenditure of £41
billion from April 2015 to
March 2020. Enterprise
Ireland is working with
UK and global buyers
who have access to this
opportunity which could
also be a stepping-stone to
international projects.
18HULL CITY & HUMBER
REGION
Following a turbulent
decade characterised by
unemployment, poor growth,
and a lack of investment, Hull
is suddenly showing strong
employment growth and
better productivity. Hull, which
is traditionally associated
with low-value, traditional
sectors like logistics and
manufacturing, has begun
the process of transformation
and diversification, placing LEEDS CITY REGION in the last 10 years. It has
it firmly on the UK’s business The Leeds City Region is diversified and welcomed
map. But Hull’s transformation the largest region outside new sectors, and now has the
remains very much in- of London, generating 5% second-highest incidence of
progress as it still shows of national economic output high-growth firms in the UK.
relatively weak productivity and employing 1.4 million While it still faces challenges
and modernisation. Major people. In addition, Leeds has in terms of skills, poverty,
investments planned in a huge business population - and private sector jobs, it
the digital, energy, and 109,000 companies - second continues to grow and attract
manufacturing Industries and only to London. The region businesses.
in local infrastructure will has experienced considerable
support growth and secure growth and development SHEFFIELD CITY REGION
Hull’s transformation and over the last decade following The Sheffield City Region is
modernise its economy. £3.8bn in large-scale a significant economic area,
development projects. While generating over £25.7bn for
GREATER MANCHESTER it lags behind in terms of the UK Economy. Traditionally,
Greater Manchester’s ten productivity and skills, it is Sheffield’s growth relied on
local authorities represent the rapidly improving and keeping the steel and coal industries,
largest functional economic pace with major business hubs which continue to be
area outside of London, with in the UK. important for the region’s
1.4 million people working in economy, accounting for
the region. It generates £56 LIVERPOOL CITY REGION £3.5m GVA. Now, Sheffield
billion in GVA every year - 40% Liverpool is at the centre has a more diverse economy
of the North West’s overall of the UK’s second-largest with major employers across
GVA, and has an impressively regional economy. With access multiple sectors including
diverse economy. While to 6 million customers and an HSBC, Boeing, Rolls Royce
it currently lags behind in economy worth £28 billion, and BT - but it has more
terms of productivity, the the Liverpool City Region is to do. While Sheffield
Greater Manchester Region a key economic area in the continues to grow and has a
is expected to outstrip UK United Kingdom. It is home to promising future, it faces the
averages in terms of growth 266,000 businesses, including considerable challenge of not
over the next 10 years. In many multinational companies just growing but ultimately
2015, the Greater Manchester including Barclays, Maersk, transforming and transitioning
Region had the fastest Sony, and Jaguar Land Rover. into a truly 21st century,
growing economy in the Liverpool has experienced a outward-looking and diverse
country. remarkable transformation economy.
19SECTION 6 — INNOVATION
INNOVATION
Companies faced with new Even more striking, is the products, new processes
challenges should maintain finding that companies that and new services to your
Innovation investment. The got involved in collaboration – customers.
evidence shows it pays off, often with additional Enterprise
writes Gearoid Mooney, Ireland support – had exports The spectrum of impacts can
Enterprise Ireland Divisional ten times the client average range from major product or
Manager, Research and and exceeded the average service-line breakthroughs,
Innovation employment level by 35%. through to finding more
efficient ways of working and
A particularly noticeable This is no surprise. In many becoming more profitable.
feature of Enterprise Ireland cases, Innovation gives
client companies post- businesses an edge on their Business Innovation isn’t
recession, is that those competitors and therefore a only for start-ups and large
that continued investing in better share of the market. companies. It has a bottom-
Research, Development and So for Irish exporters facing line impact on businesses
Innovation (RDI) through the into a potentially tougher of all sizes and stages of
lean years have come through market in the UK – not least development.
as thriving businesses with because of challenges around
above-average employment currency – it is worth bearing It is also not something you
and export levels. in mind that price is not the only do during good economic
only determinant of consumer times, it is what can help you
If you are not spending on choice. sustain existing business and
RDI then you are probably provide scaling opportunities
out of step with your peers. Product design is essential for the future.
Our Annual Business Results to most offerings, and with
survey for 2015 found that many having one-to-three-year This isn’t just theory. The
91% of respondents spend on lifespans, continual renewal is hard facts from our annual
Innovation, of which 66% used needed. Hence the advice to analysis of our clients’ financial
Enterprise Ireland R&D grants. keep investing in Innovation in performance go back many
good times and bad. years and cover periods when
Our survey also found that business conditions were
clients who availed of our INNOVATION DEFINED at their most expansive and
Innovation supports, had Business Innovation is about during deepest financial crisis.
employment levels 25% above creating and profitably
average and exports 30% above applying new ideas in your The truism over these years
the average of our client base. company, bringing new is that those companies who
20“Innovation gives businesses an edge
on their competitors and therefore a
better share of the market”
consistently make significant internal procedures right. for instance, can help you find
investments in their innovation Appoint a dedicated senior the right third-level research
have superior sales growth manager to be responsible partner. This also applies to
even when the general for your RDI and know how facilities or equipment that
business climate is tough. to measure progress and be may only be needed for the
sure your company can make project at hand.
Great companies also make use of the innovation you are
a virtue of their Innovation developing. Clients can also log on to
capacity with their customers knowledgetransferireland.com
and use it as a means to get Listen to the voice of your where a wealth of resources
clients more invested in doing customer. If possible, test your can be found that may be of
business with them in the future. progress with customers as help such as information on
you go through the process. research talent, equipment
Of course the investment has As the statistics show, getting availability and sample
to be strategic, embedded in the right external interventions collaboration agreements.
the culture of your company at the right time brings in the
and tapped into the constant best available knowledge to Another possibility is to look
pulse of your customers’ enhance the success of your to other companies who may
requirements. Innovation drive. be involved in similar research
either currently or in the past.
It should be funded efficiently, So if your enterprise does not Of course be prepared to give
well managed with a team that have appropriately skilled RDI something back. Peer-to-peer
knows how to deliver for your staff then finding external sharing works both ways.
business and well aware of the skill resources to supplement
trends and thought leadership the team can be a way to Finally, be prepared to re-
around your offering. overcome that challenge. You invest profits in Innovation.
may only need additional skills This can be supplemented by
It can sound complex, but for a defined period of time. state resources, grants and
these are all things Enterprise Collaborations are a favoured tax credits to offset some
Ireland understands and we approach but retaining the of the cost or increase the
have a growing set of tools right consultant or advisor is ambition of your project. To
to help clients with every also a good idea. find out more about how
consideration. Innovation can help your
Clients unaware of how to business through these
INNOVATION BASICS access this type of expertise uncertain times, contact your
Before you start, get your can avail of our services which Development Advisor.
21SECTION 7 — SUPPLY CHAIN
SUPPLY
CHAIN
Garrett Cronin, Advisory using centralised hubs. process of finishing goods) to
Consulting Partner, PwC, an EU location.
highlights how the UK leaving UK contracts referring to EU
the EU could bring both law, or the requirement for Also, UK labour costs (eg
opportunities and challenges EU access, may require re- operator costs) could increase
to Irish-based supply chains. negotiation or amendment. as a result of inflation due
Trade credit insurance should to sterling volatility and a
SOURCING also be considered. reduction in available labour if
While initial drops in the immigration is reduced.
value of sterling have created Local or dual-sourcing
sudden opportunities for operations could increase, With 80% of Ireland’s product
procuring goods and services as organisations try to limit energy imported from the
from the UK, the longer term their exposure or try to take UK, production costs in
could see an overall reduction advantage of increased ‘going- Ireland could be adversely or
in this activity as organisations local’ consumer sentiment. favourably impacted, largely
limit their exposure to any depending on the outcome of
future tariffs on UK imports. PRODUCTION the political negotiations.
With so much global
In addition, organisations uncertainty, demand volatility Product development,
in other EU countries may is likely to be a major factor in certification, quality control
reassess their UK sourcing, the near future. While this will and intellectual property may
ensuring supplies that could impact demand and supply also see changes and new
attract high tariffs (eg planning at global levels, it legislation.
agricultural products) are could provide motivation for
avoided, potentially sourcing organisations to centralise this LOGISTICS NETWORKS
them from Ireland instead. function in Ireland. Opportunities now exist for
redesigning and consolidating
Services may also be affected, Organisations using supply-chain networks
with UK-based service centres production activities in the into Ireland. This would be
and supply-chain hubs UK to supply the UK market more likely for those who
becoming unviable (eg if all may be sheltered from any transit goods destined for
procurement is done in the direct impact. But where the EU through the UK or
UK for EU production). This UK production exists for if warehouses based in the
could be an opportunity for EU markets, there may be UK were eventually to see
firms to manage their end-to- an incentive to relocate throughput movements being
end supply chain from Ireland production (or at least the treated as imports and exports.
22“Opportunities now exist for
redesigning and consolidating
supply-chain networks into Ireland”
Distribution may see volume Aftermarket, repair and There is likely to be delayed
shifts in orders from the UK reverse logistics operations decision making, impacting
instead going to the EU, US may also become unviable in expansion, production
or new markets, potentially the UK for EU consumers and opportunities, footprint/
impacting freight rates based vice-versa for UK customers landscape changes, or M&A
on volume discounts for using centres in the EU. activity – which could affect
specific routes. investment in both the UK and
VALUE CHAIN AND BACK Ireland.
This may have a greater OFFICE
impact on Irish-owned The UK may see an increase in The cost of business travel
companies than on foreign- regulatory, legal and customs to and from the UK could
owned companies based requirements, creating a need increase should new charges
in Ireland, because foreign for local export control teams or visa requirements be
owned companies rely far or for back-office outsourcing introduced.
less on the UK as an export of this activity to specialists
destination. (at a cost). WHAT CAN ORGANISATIONS
DO?
Alternatively, online sales Any new requirements could — Immediate actions:
from the UK could increase also increase supply-chain Focus on the initial
due to fluctuating exchange administration costs, with consequences (eg
rates, and, should any related the respective systems (eg changing sourcing
global economic downturn ERP) also potentially needing approaches to benefit
occur, global freight rates updating or upgrading to from exchange rates
could change based on the support this. fluctuation)
effect on overall capacity. — Medium Term: Scenario
Working capital requirements plan, based on ‘what if’
Lead times may need to be may increase to support or on statements coming
assessed as a result of longer the need for immediate or from negotiations (eg
processing times associated postponed customs and consider initiating network
with export regulations duty payments, should they reviews).
and transportation to new, become applicable. While the — Longer term: Act on the
more geographically distant actual costs on imports to basis of what emerges
markets. This would be likely Ireland or exports to the UK from negotiations (eg
to have a larger impact on may not increase, any initial changing supply chain
ad-hoc or time-sensitive outlay of cash required could strategies or implementing
orders. impact cash flow. network changes).
23SECTION 8 — LEGAL ISSUES
LEGAL
ISSUES
Sean Ryan, Partner in planning involving contract and EU citizens will no longer
Eversheds Corporate and reviews should start now enjoy an automatic right to
Commercial Department with a view to identifying and travel to, and work in, the UK
in Dublin and Chair of its managing risk. and vice versa. Irish companies
designated Brexit Unit, outlines with non-UK citizens working
key legal issues for companies KEY ISSUES TO CONSIDER, in the UK (and Irish companies
to consider. WITHIN A GENERAL with UK citizens working in
TRADING CONTEXT, Ireland or elsewhere in the
T here has been much talk
about what the UK’s
future trading relationship
INCLUDE:
—— Reviewing strategic
contracts in place where
EU) can expect changes
to the pool of UK workers
coming into Ireland and/or
with the EU might look like. there is a dependence on the EU; and are likely to face
A bit like the end of the UK trade and where pricing greater bureaucracy and visa
‘Rose of Tralee’: will it be the mechanisms are in place applications in recruitment.
Norwegian model, the Swiss that assume no tariffs,
model or maybe even the quotas or other barriers However, one would expect
WTO model? The truth is, that allowing free movement
nobody knows. —— Reviewing contractual terms of people will be a significant
that could be triggered issue for the EU, if it is to
Regardless, certain areas (against you) because of permit the UK access to the
of business are likely to be the circumstances of a UK Single Market post exit.
impacted to varying degrees, exit from the EU (including
particularly by changes to/ market volatility) COMPETITION LAW
divergence from existing On exit, EU competition laws
trading rules, employment —— Reviewing contractual (which incorporate three
(immigration) laws, terms that should perhaps main areas: merger control,
competition laws and data be varied because of a anti-competitive agreements
protection requirements. UK exit from the EU. This and state aid) will cease
should also be considered to be applicable in the UK.
CHANGES TO TRADING for any future tender or The British will have their
RULES evaluation process for new own competition laws that
– CONTRACT REVIEWS arrangements. Irish companies carrying on
While the future shape of the business in the UK will need to
UK’s trading relationship with EMPLOYEES comply with (independent of
the EU is unclear, contingency If the UK leaves the Union, Irish EU competition law).
24“One would expect that allowing free
movement of people will be a significant
issue for the EU, if it is to permit the UK
access to the Single Market post exit”
Probably of most significance,
the law on state aid will no
longer be applicable in the
UK, which would increase the
ability of the UK Government
to support UK businesses
financially to the detriment
of competing Irish/EU
businesses. Equally, however,
the UK would have limited
ability to challenge state aid
granted to Irish/EU companies
that affect the UK market. are located in the UK; which other alternatives with the EU
For these reasons, one would entities and operations (eg for the EU to recognise the
expect that any agreement transfer personal data UK’s data protection regime
by the EU to permit the UK to the UK; and where UK as providing an adequate level
access to the Single Market operations access personal of data protection).
will require compliance by the data held elsewhere in the
UK with EU State Aid rules. EEA. In addition, the UK will be free
But, something to watch. to implement its own data
Many transfers outside protection legal framework
DATA PROTECTION the EEA currently rely on going forward and may not
On exit, personal data alternative mechanisms to be bound by the same rules
transfers to the UK, even implement the ‘adequate imposed on EU Member
intra-group transfers, will safeguard’ standard such as States.
be subject to the same model contracts and binding
restrictions as any other non- corporate rules. In summary, Irish companies
EEA countries (eg US) and will that have a dependence on
need to meet the ‘adequate However, these mechanisms UK trade should now begin a
safeguard’ standard required may not be suitable in the review of their operations with
for those data transfers to be long-term given the level of a view to identifying areas of
lawful. trade and data transfers that their business most likely to
take place between the UK be affected by the UK leaving
Companies should identify and Ireland. In this regard, the EU; and managing risk
which systems and servers the UK may seek to agree accordingly.
25“Irish companies that have a dependence on UK trade should now begin a review of their operations with a view to identifying areas of their business most likely to be affected by the UK leaving the EU; and managing risk accordingly” 26
27
SECTION 9 — TAX
TAX
Daryl Hanberry, Tax Partner; UK, which, in principle, would reward perspectives.
Tom Maguire, Tax Partner; and attract VAT on importation
John Stewart, Tax Director and possibly customs duty. There are some indications the
at Deloitte, highlight some of Common Travel Area between
the potentially significant tax Determining who will bear the Ireland and the UK will remain,
impacts that Irish firms may burden of such costs will be a so that Irish nationals could
have to consider. commercial issue. In a number continue to live/work in the UK
of cases, it may be the Irish and vice versa.
VAT, CUSTOMS AND EXCISE supplier, who will then have to
If the UK leaves the European register for VAT in the UK. However, people should
Union, it is likely to continue look at whether they meet
to operate the current VAT For B2C sales, Irish businesses Permanent Residence/Dual
system underpinned by UK generally either charge Irish Passport conditions.
legislation, though it will be VAT or register and charge UK
free to make any changes it VAT. If the UK leaves the Single Post exit, new British
sees fit. Market, all Irish businesses immigration legislation will
selling goods and services to be needed and the UK will
The movement of goods non-business customers in need to consider whether to
between Ireland and the the UK may have to register introduce visa requirements
UK is likely to be subject to and charge UK VAT, which for European Economic Area
border controls; with potential will be an additional cost and (EEA) business travellers.
changes to the current compliance burden.
customs duty, accounting and UK assignees remunerated
customs clearance systems in For goods coming into Ireland in sterling in Ireland will have
both countries. Excise duties from the UK, Irish import VAT seen their compensation
are local duties imposed by and customs duty could be package drop significantly
countries within their own payable. Again, whether the with the fall in the value of
borders, and we do not expect supplier or the customer bears sterling. This may lead to
a major change to these. that cost will be a commercial requests for a review or trigger
issue. an “exceptional circumstances”
Under the existing rules, clause in company policies.
Irish businesses selling to UK EU STAFF IN THE UK/UK
businesses generally do not STAFF IN IRELAND Potentially worsening UK
have to collect VAT on sales. In In the area of cross-border budget deficits may lead to
a post-secession future, sales workers, there are a number increases in income tax in
of goods by Irish businesses of things to consider from the UK, with direct impacts
will become imports in the immigration, mobility and on UK-based employees.
28“The movement of goods between Ireland
and the UK is likely to be subject to border
controls, with potential changes to the
current customs duty, accounting and
customs clearance systems in both countries”
Social security will need to
be considered and, while
there are Ireland-UK social
security agreements separate
to EU legislation, additional
paperwork may be necessary.
Individuals who hold shares
in Irish or UK companies are
likely to have been affected
by recent market volatility.
For employees, this may also
have affected the value of any
share-based remuneration. EU trade and administrative ensure domestic law continued
For senior executives whose cooperation. to comply with EU law.
reward may be based on a
number of factors (including Subject to transitional The EU Treaties’ state aid
share price), this may affect provisions, when the UK provisions may also be
whether they meet their leaves the EU, these directives relevant. The UK may have
objectives and receive would, in principle, not apply, to consider additional tax
incentive-based remuneration. so that withholding tax on law amendments to ensure
Companies should consider payments to and from the it remains competitive and
aligning rewards with actual UK may become applicable continues to attract foreign
performance rather than (subject to domestic law direct investment in the post-
factors outside the individual’s provisions). Similarly, the exit regime.
control. benefits for certain corporate
restructurings involving the Some UK tax reliefs are
DIRECT TAXES Mergers Directive may not offered only in relation to EU
Although direct taxes apply. member states. One could
(such as income tax and find those reliefs withdrawn
corporation tax) are a national The four EU Treaty freedoms unless the UK attains EEA-like
competency, for EU members, (free movement of people and membership. Similarly, EU
such competency must be capital, provision of services preferential tax treatments
exercised in accordance with and freedom of establishment) are included in other Member
the European Treaties. The UK are relevant for direct tax. If the States’ legislation and would
has implemented a number UK leaves, but remains within likely expire once the UK
of tax directives to aid intra- the EEA, it would need to leaves the EU.
29SECTION 10 — DIVERSIFYING INTO NEW MARKETS
DIVERSIFYING
INTO NEW
MARKETS
Irish exporters to Britain will For example Germany is a has your product or service in
consider various strategies lucrative market but has slower the target market.
for managing changed decision-making times. If you
arrangements if the UK leaves are in a position to commit for Market analysis is required
the EU. Diversifying into a longer period then markets for this. Enterprise Ireland
new markets is one option. like Germany may be suitable supports this through our
Enterprise Ireland Manager but faster decision-making Market Research Centre,
for Germany, Switzerland markets such as Switzerland, market advisors and offices
and Austria, Eddie Goodwin the Nordics or Benelux may be around the world positioned
outlines key considerations. more relevant to business. in, or near, most global
markets. Enterprise Ireland
H ow you enter a new
market is a strategic
decision that will define the
CAN YOU LEVERAGE
BUSINESS WON IN NEARBY
MARKETS?
also offers a range of
financial supports tailored for
companies diversifying in to
very nature of your business The first thing to consider is new markets.
there. There are two choices – whether you have a reference
sell directly or have someone customer in one market that BUSINESS CULTURE IN THE
sell for you. Your decision could be used as a springboard MARKET
will be guided by resources, into another market. After that, It is important to understand
opportunity and the nature of where would your reference this. Business cultures can
your offering. customers be easily recognised vary considerably. Failing to
and respected? understand cultural nuances
A software company, for can be the difference between
example, may find it natural to For example being success and failure. Your
sell directly to the customer, geographically and culturally approach may not be well
while a manufacturer of close, the Benelux (Belgium, received locally or you may
farm machinery will find a Netherlands, Luxembourg) have underestimated the time
distributor the obvious choice. would often be a natural next it takes to actually get your
step into Northern Germany or offering onto the market –
COMMITMENT REQUIRED & vice versa. which could have significant
RESOURCES NEEDED implications for your budget.
What budgets do you need to CHOOSING THE MARKET
successfully close business in Consider who your competitors IS THIS AN EARLY-ADOPTER
your new market? What is the are and the risk they might MARKET?
normal decision making time pose to your success. How Is your company at the right
for closing deals there? different or what added value stage for your selected
30“Consider who your competitors are and
the risk they might pose to your success”
market? For example the REGIONAL APPROACH MORE
Nordic markets are often SUITABLE?
adopters of early-stage France is a large target market
technologies and comfortable with clusters and strengths
partnering with early-stage in different regions. In your
companies so perhaps these sector, consider whether it is
markets are more suitable for possible to target one region
a company at high potential which is easier to manage
start-up stage. from an export perspective.
For instance, in large countries
LONGER-TERM RESOURCES like Canada, it is advisable
NEEDED TO ENTER THE to establish a regional
MARKET presence first in one location,
Do you need to employ “boots eg Ontario. This can be a
on the ground” early on or springboard to the rest of the
can this all be done remotely? country over time.
Things to consider would be
the product or service. The HAVE YOU THE CAPABILITY
latter is usually a much more TO UNDERTAKE TWO
straight forward route, in MARKETS AT ONE TIME?
that testing etc. can be done Can you successfully manage
remotely. However some two regional areas with
business cultures expect partners or employees? For
close contact with the HQ and example, it is not uncommon
others less so. for parts of France, Belgium, Sometimes the environment
Germany and the Netherlands can be favourable. For
ROUTE TO MARKET to be handled by the same instance, the strong Franc in
REQUIRED agent or employee. Switzerland is offering Irish
Can this be done through a companies an advantage
successful distributor or agent CURRENCY ISSUES AND right now, making them
or is a direct sale process WHETHER THERE IS A RISK more competitive than local
necessary? A good distributor OR ADVANTAGE RIGHT NOW competitors.
can cut the sales lead times This hardly needs saying in
significantly. the context of the UK but the For support in diversifying
danger currency fluctuation into new markets see our
CAN YOU APPROACH THE poses to your margin should International offices listed on
MARKET FEDERALLY OR IS A always be considered. the back pages.
31SECTION 11 — CONCLUSION
CONCLUSION
Kevin Sherry, Enterprise Ireland firms have what it takes to We will have more inward
Executive Director, Global diversify into growth markets buyer visits, market study
Business Development. including the USA, Northern visits, international trade
Europe and Asia Pacific, all of fairs, Embassy events and
T he UK vote to leave the
European Union was
a surprise to many but as
which experienced significant
growth in 2015.
knowledge seminars, all aimed
at linking Irish companies
with international buyers.
outlined throughout this Our clients made sales worth Companies thinking about
document, Enterprise Ireland nearly ¤4.2 billion in Northern international diversification as
clients are well placed to deal Europe, nearly ¤3 billion in a response to the UK vote can
with the risks and also the North America, and nearly contact their Development
opportunities that may arise. ¤1.6 billion in the Asia Pacific Advisor or keep an eye on the
region. Enterprise Ireland Twitter feed
Enterprise Ireland’s strategy of and website for updates.
developing new international Significant growth was
markets and deepening recorded in particular sectors: As you will have seen
our reach into the UK has —— Internationally traded throughout this guide, there
been paying off. Our Annual software up 32% to ¤1.8bn are many other initiatives
Business Report for 2015 —— Construction and consumer that clients should consider
shows that client exports to up 21% to ¤2.8bn as a means of managing any
the UK went up 12% to ¤7.5bn —— Manufacturing up 11% to vulnerabilities that may arise
in 2015 and the UK is, and ¤3.4bn for exporters to the UK.
will remain a key market for —— Food companies up 3% to
Enterprise Ireland clients. ¤10.6bn Dr Richard Keegan has
outlined a rigorous method
That said, our strategy As part of our response for cutting costs as a way of
on helping companies to to the UK result, we are improving the competitiveness
diversify into global markets strengthening our position of your offering in a market
has also been working. in the UK and identifying where margins could be under
Overall Enterprise Ireland opportunities for clients in pressure by fluctuations in the
client exports to the UK have key sectors such as fintech, value of sterling.
declined from 45 per cent in construction, health and
2005 to 37 per cent in 2015. aerospace. We are also Price sensitivity is not the
intensifying our trade missions only issue in the UK market.
Ireland is a strong, open and and buyer events and are As Gearoid Mooney points
competitive economy and our targeting ¤1.4 billion in export out, many products only have
clients have proven that Irish growth for 2016. a lifespan of one to three
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