There is a lot of talk about the hoped-for inflow of financial services firms related to Brexit. But there will be a flow of outward investment, too. Some Irish-owned firms selling to the UK market will establish plants in Britain, or buy existing operations there. This is one obvious safeguard to the risk of customs checks and tariffs for those selling into the UK market.
On Wednesday Ornua, formerly the Irish Dairy Board, announced that it was buying a cheese plant in the UK market, FJ Need in Cheshire, with an annual turnover of €50 million. Ornua already has operations employing some 950 in the UK – and is also expanding in other markets, notably Germany and the US, meaning its move is not purely Brexit-related.
But in its statement announcing the acquisition, the company noted that the move “will also strengthen Ornua’s UK business’s capabilities in the post-Brexit environment”. Decoded from business-speak, this means it will be able to serve UK customers from a UK plant, if needed.
High tariff barriers
This is likely to be a trend, presuming – as seems likely – that the hard-Brexit narrative keeps going. For food companies, in particular, facing potentially high tariff barriers if the UK and EU cannot agree a deal and WTO tariffs come into force, UK acquisitions may make sense. It will vary from business to business: some will choose to concentrate on non-UK markets, such as France, while others will bet that they will still be able to serve UK markets from the Republic. But it would be a surprise if the UK industrial agencies were not already sounding out firms from the Republic. This would include Invest NI in the North, which could see opportunity in luring smaller businesses that might want a UK base but might not be ready to cross the Irish Sea.
New trading deal
There are a few unknowns here. The most obvious one is what trading arrangements will apply between the UK and the EU in the long term. A vital issue also is what happens in the interim period between Britain leaving the EU and a new trading deal coming in to force, which may involve a gap of four years or more.
Britain takes some 40 per cent of Irish food exports and many companies will not want to take the risk of access being hindered to a key market.
Article Source: http://tinyurl.com/kbwqb42