A sobering assessment of the food and drinks industry in Ireland has been revealed in a new survey carried out among members of the Restaurant Association of Ireland (RAI) and the Vintners Federation of Ireland (VFI).

The survey claims that a ‘perfect storm’ of Brexit and high excise is hitting the sector hard, particularly in the border counties. Respondents claimed that they’d seen an average 12% downturn for British tourist spend for July and August compared with the same time last year, with the effects of sterling exchange being cited as a factor.

Respondents in the border counties reported a drop of up to 20% on cross-border spend in July/August compared with the same two months last year.

Adrian Cummins, CEO of the RAI, said: “The ‘Support Your Local’ campaign warned earlier this year that we were about to face ‘the perfect storm’ with high excise and Brexit – we in the restaurant industry are already feeling the chill winds.”

Padraig Cribben, CEO of the VFI, added: “We firmly believe that the Brexit vote has resulted in an even stronger case for a significant reduction in alcohol excise.

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“Budget 2017 should compensate for the negative effect of Brexit, such as exchange rate uncertainty, impacts of a new ‘border’ and the impacts that Brexit might have on British tourists and their spend in Ireland.”

Substantial Threat

Elsewhere, Ibec business lobby Food and Drink Industry Ireland (FDII) published a new review of the challenges posed to the sector by Brexit, and warned of a substantial threat to thousands of jobs if the government failed to respond decisively.

The FDII argued that UK buyers are reviewing their supply chains in light of the vote and sterling's subsequent fall, adding that it was crucial that Irish firms don't lose out.

The report recommends a review of the national agri-food strategy FoodWise 2025; budget tax reform, and the re-introduction of the Employment Subsidy Scheme and the Enterprise Stabilisation measures that were last applied in 2009-11.

The FDII report also includes a different survey of food and drink companies, in which 64% said exchange rate movements would have a negative impact.

The survey also found that 42% of respondents expected a negative impact on the value of export sales, 42% identified exchange rate volatility as the biggest problem and 51.5% have hedging or pricing arrangements in place.

The FDII said that a review of the historical exchange rate and agri-food export relationship showed that a 1% weakness in sterling results in a 0.7% drop in Irish exports to the UK.

If sterling was to weaken further towards the £0.90 mark, the Ibec group warned, it would translate to losses of over €700m in food exports and about 7,500 Irish jobs.

FDII director Paul Kelly said: “Urgent action is now required to protect our vital exports to the UK market, limit damage in the domestic market from imports, and address competitive pressures caused by the fall in sterling.

“In addition to an immediate response to the currency shock, we need to work towards a positive outcome in formal exit negotiations. The main objective must be to maintain full unfettered access to the UK market for Irish exporters.

“UK access to the EU single market is much more preferable to UK bilateral agreements with third countries.”

Kelly concluded: “The government’s short-term objective must be to support companies as they reposition their businesses during this period of uncertainty.

“The focus must be on maintaining markets in the UK, developing other markets as well as ensuring that, in the domestic market, companies remain competitive against imports and the threat of cross-border shopping.”