Brexit Speeds Reorientation of Irish Business Towards Germany

GTAI builds new bridges to the Emerald Isle

August 2020

In Ireland, change is in the air. The Irish had little influence on the UK’s Brexit vote, but the country will likely be the most exposed to its repercussions of any country but the UK itself. This goes well beyond the politically sensitive issue of the border between the Republic of Ireland and Northern Ireland. At the end of 2020, the UK’s transition period ends and frictionless trade between Ireland, the UK, and the rest of the EU will no longer be the same. Over 20 percent of all Irish exports could be directly affected. Prices of imported goods may also rise and economic growth could take a hit in the coming years.

What role does Germany play in all of this? Could there be a silver lining for German-Irish economic ties? Markets Germany spoke with Mr. Robert Scheid, Germany Trade & Invest’s Director for the UK & Ireland about the bilateral relationship with Ireland, as well as Brexit’s challenges and potential hidden opportunities.

Thank you for speaking with us today. Since June you have taken on the additional role of assisting Irish companies expand their operations to Germany. How did this come about?

Scheid: From our office in London I’ve been working to help British companies since 2018. I noticed early on that enquiries were coming not just from indigenous UK companies, but also Irish, American and Japanese companies based here. We have seen a significant uptick in interest from Ireland, including several Irish delegations to Germany. Plus we already work closely with a number of partners in Ireland, so the logical next step was to expand our activities to more actively help Irish companies set up an office in Germany.

You are based in London, rather than Dublin. Is this a problem?

Scheid: It is absolutely more challenging, especially given current travel restrictions. That’s why we are grateful to rely on our partners at the German-Irish Chamber of Commerce and the German Embassy in Dublin to introduce us to Irish companies. Once travel restrictions ease I plan to visit Ireland frequently, also because it’s a wonderful place to explore.

Dublin, Ireland, Samuel Beckett Bridge © Pixabay

What is driving Irish companies to rethink their international business strategies?

Scheid: The elephant in the room is Brexit. Ireland is historically, geographically and economically tied very closely to the UK. It has the only land border with the United Kingdom and is a close trading partner, not to mention the shared English language. Just as importantly, more than a quarter of Ireland’s trade with the EU crosses the UK land bridge.

What will change after the transition period?

Scheid: Irish companies are still waiting to know what happens at the beginning of 2021. At that point goods traded across the land bridge have to enter the UK – thereby leaving the EU – cross the country, and re-enter the EU. Customs processes could add a day to shipping times and increase the cost by as much as 8 percent, according to a study by the German-Irish Chamber of Commerce. Even a free trade agreement between the EU and the UK will not eliminate the bureaucracy, time and additional cost to businesses.

So are Irish companies looking for ways to diversify their dependence on the UK market?

Scheid: This diversification was already taking place long before Brexit. Back in the 1980s over one third of all Irish exports went to the UK, a decade ago it was half that. Now it’s only around 10 percent. The USA is the number one market for Irish companies and Germany has increased its share to almost 9 percent. And the diversification strategy is supported by the Irish government, which opened a second Enterprise Ireland trade office in Germany in 2019.

As for the transport route through the UK, there is already some change happening, although there is no easy solution. New seaborne shipping routes are not feasible for perishable goods like food, while air cargo is more expensive.

»Half of all Irish investments in Germany over the last decade followed the Brexit vote.«

Why do you see potential for Irish companies in Germany?

Scheid: Ireland is the country that has experienced the strongest economic growth in the EU over the past two decades. Even if you remove all of the accounting effects by large multinationals, Ireland still comes out ahead of Poland and Romania in terms of its massive economic expansion. With that kind of growth, there are an increasing number of successful, innovative Irish companies looking to expand internationally. We believe that Germany offers the right market dynamics to foster these companies. When you add Brexit to the mix, the timing is right to look more closely at Germany now.

Are Irish companies already investing in Germany?

Scheid: Over the last decade there were around 80 investment projects by Irish companies in Germany. Strikingly, nearly half of them occurred since the Brexit vote in June 2016. There is strong growth and enormous potential, which compensates for Ireland’s relatively small size. Also interesting is that the range of industries covered is quite broad: investments cover food & beverages, pharmaceuticals, software, electronics and more.

Do you expect this “Brexit effect” to continue?

Scheid: Clearly the COVID-19 pandemic has made predictions difficult. But it remains true that Germany and Ireland are working hard to maintain and strengthen bilateral links. We think Germany is a natural partner to Ireland. Germany is open to international companies, remains an EU ally, and uses the same currency. It is an easy, low-cost, tariff free trading and investment partner, so I see the partnership growing naturally together in the coming years regardless of short-term risks.

For more information about how Germany Trade & Invest can help you establish your business in Germany, contact Robert Scheid at robert.scheid@gtai.com and visit our dedicated website created to help international companies mitigate Brexit risks at www.gtai.com/brexit.

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