No Deal’ Brexit would be disastrous for Irish Drinks Industry – new ABFI position paper
Monday, 15 October 2018
• A No Deal would see immediate tariffs on barley, malt, glass bottles, apples, finished cider
• Hard border would lead to delays and disruption for 23,000 cross-border truck movements
• Value of trade in drinks products between the UK and Ireland worth €364m
• New Future Growth Loan Scheme announced in Budget 2019 must be open to Irish distilleries and spirits producers – unlike previous Brexit Loan Scheme
Alcohol Beverage Federation of Ireland (ABFI), has today warned that a ‘No Deal’ Brexit would be disastrous for the All-island drinks industry, delaying and disrupting 23,000 cross-border truck movements, applying unnecessary tariffs on cross-border supply chains and putting €364m worth of trade between the UK and Ireland at risk.
In advance of this week’s crunch EU summit, ABFI has published a new position paper: “Brexit and the Irish Drinks Industry - Priorities for the future relationship.” The paper outlines the potential consequences of a ‘No Deal’ Brexit, including:
• Lack of continuity in legal protection for Irish cross-border Geographic Indications for Irish Whiskey, Irish Cream Liqueur and Irish Poitín in Northern Ireland and the UK;
• Lack of continuity in access for Northern Irish producers to global free trade opportunities;
• Immediate tariffs on barley, malt, glass bottles, apples, finished cider and other supply chain inputs;
• Regulatory and customs checks at the Irish border, leading to significant delays and additional costs for 23,000 cross-border truck movements;
• Requirement for up-front VAT payments on cross-border trade;
• Potential for regulatory divergence across a range of standards from labelling to bottle sizes.
ABFI is the all-island trade association for the Irish drinks industry and forms part of Ibec, Ireland’s largest business representative body.
Patricia Callan, Director of ABFI stated: “The Irish drinks industry is a highly integrated all-island sector, that’s important for both the Irish and Northern Irish economies. For us, Brexit could be highly disruptive, particularly if there was to be a disastrous ‘No Deal’ scenario. However, this need not be the case and we would urge all parties to seek to ensure that a Withdrawal Agreement is concluded and that a ‘No-Deal’ Brexit is avoided. We want to see clear, robust provisions to safeguard the all-island economy and to avoid a hard border on the island of Ireland.”
The new ABFI paper outlines that global drinks exports from the island of Ireland were valued at €1.6 billion in 2017. The aggregate value of trade in drinks products between the UK and Ireland was €364m, one third of which, (€121 million) was the aggregate value of north-south trade. The UK remains the dominant market for Irish beer (71%) and cider (85%).
Patricia Callan stated: “In terms of EU-UK trade, the economic interests of both the EU and the UK would be best served by the UK remaining in a customs union with the EU. If this cannot be achieved, then a comprehensive alternative approach must be put in place. A fall-back to EU external tariffs or WTO rates must be avoided.”
A no-deal Brexit could result in a range of new tariffs on cross-border supply chains, including:
• Tariffs of up to €93 per tonne on barley and €131 per tonne on malt;
• An EU external tariff of 5% on 130 million glass bottles imported into Ireland from the UK;
• A 7.2% tariff on apples grown in Northern Ireland.
Callan stated: “Tariffs would add significant costs to Northern Irish whiskey distilleries and breweries buying barley and malt from Ireland, to Irish craft distilleries and breweries buying specialist malts from the UK and to Irish cider producers buying apples from Co. Armagh. Similarly, tariffs on finished cider products would damage the cost competitiveness of Irish and Northern Irish cider producers, threatening sales and jobs.”
Callan added that while Brexit poses risks of disruption to free trade between Ireland and the UK, it also threatens trade between Northern Ireland and the rest of the world. She stated: “We do not want Northern Ireland producers to face any significant comparative disadvantage if they lose access to EU free trade agreements.”
The ABFI paper highlights how the Irish drinks industry operates on an all-island basis with seamless cross-border supply chains. In total the Irish drinks industry carries-out over 23,000 truck movements across the Irish border every year, over 5,000 of which are alcohol tanker-movements.
Patricia Callan stated: “The Irish drinks industry is clear in our desire to avoid a hard border and for seamless alignment between the EU and the UK - particularly between Ireland and Northern Ireland - on regulation, VAT, and excise. Checks at border points could add an additional hour or €100 per truck movement to costs.
“We also need to avoid divergence on VAT. Drinks producers in border counties have, at any one time, up to 40 ‘live’ suppliers on the other side of the border. If there was to be no Brexit agreement on VAT, then, for the first time since 1993, an import VAT charge could become payable up-front at the point of importation resulting in significant cash flow disruption and increased administration costs.”
Callan also highlighted the double-standards of the Irish Government on North-South regulatory divergence: “Already, the Irish Government is signing-up to regulatory divergence in labelling between North and South by seeking to introduce country-only labels for Ireland under the Public Health (Alcohol) Bill. This type of negative regulatory divergence will be highly damaging to the all-island drinks industry, particularly for smaller producers, such as Northern Irish Gin producers, for who Ireland and Northern Ireland are their two largest markets and who will now require two labels for the one island. This regulatory divergence should be reversed, and further regulatory divergence must be avoided at an already disruptive time.”
In its paper, ABFI is calling on the European Investment Bank to end its discriminatory prohibition on distilled spirits producers from accessing the Irish Government’s Brexit Loan Scheme.
Patricia Callan stated: “ABFI welcomes the Government’s commitment to assisting businesses to deal with the Brexit threat. The expansion of sustainable financing measures for working capital and longer-term investment such as the Irish Government’s Brexit Loan Scheme, are vitally important. However, as this Scheme is part-funded by the European Investment Fund, the European Investment Bank rules apply, which means that the producers of distilled spirits have been excluded from applying for the Brexit Loan Scheme. We are calling for an end to this unjustified discrimination.”
Commenting on announcements in last week’s budget, Callan added: "ABFI welcomes the €300mn Future Growth loan scheme announced in Budget 2019. We are calling on the Irish Government to ensure that this new loan scheme - or a separate bespoke strand - is open to Irish distilleries and spirits producers.
Callan concluded: “We look forward to continuing our active engagement with the EU Commission and the Irish and UK Governments to ensure our priorities are addressed in the ongoing negotiations and to achieve the best possible outcome and least possible disruption for the all-island Irish drinks industry.”
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