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Brexit: Firm-level Impact on Enterprise
IGEES Conference, Dublin Castle, June 8th 2017
Dr. Cathal FitzGerald
Strategic Policy Division
Background
Significant Government, DJEI and Agency response
“What impact will Brexit have on enterprise?”
More specificity required:
o What type of Brexit?
o What type of enterprise?
Useful output:
o Avoid duplication
o Inform policy-response to Brexit, and negotiations
Research Question
What are the implications for Ireland’s most exposed enterprise sectors, at firm-level,
- in terms of trading and economic relationships - of the UK being outside of the
European Single Market and Customs Union?
What are the associated implications for FDI in terms of the freedom to invest
in/own/manage enterprises, and undertake certain financial transactions?
How does this inform our approach to negotiating guidelines and subsequent
negotiations?
Narrows the breadth of the research in a way that is informative while being realistic
Complements research underway but does not duplicate it
Is linked explicitly to negotiations
Gives consideration to the two-way import/export trade relationship
Focusses on specific aspect of FDI activity
Most Exposed Sectors I
Replicate existing analysis:
o Enterprise Agency client firm data
Proportional exposure:
o Where the UK is the destination for a high proportion of a sector’s total
exports.
Size exposure:
o Where a sector’s exports to the UK are a large share of Ireland’s total
exports to the UK.
Import exposure:
o Where a sector imports a large share of its inputs from - or via - the UK.
Most Exposed Sectors II
~ 60% of all exports, ~ 40% of all private sector employment
Size Exposure
1. Computer Programming
2. Computer Consultancy
3. Food, Drink, and Tobacco
4. Chemicals
5. Computer Facilities
Management
6. Transport Services
7. Insurance/Financial Services
Proportional Exposure
8. Wood and Wood Products
9. Agriculture, Fishing, Forestry,
Mining and Quarrying
10. Paper and Printing
11. Energy, Water, Waste and
Construction Services
12. Textiles, Clothing, Footwear,
and Leather
13. Non-Metallic Minerals
Import Exposure
14. Rental and leasing services
15. Computer, electronic and
optical products
16. Petroleum, furniture, and other
manufacturing
17. Wholesale/retail trade
18. Basic pharmaceutical products
Pilot Sector / Firm Selection
Consultation: DJEI, Enterprise Agencies, DAFM
o Computer Consultancy, Food and Drink, Wholesale/Retail
o Goods / Services, Exports / Imports, Locally Trading
Purposive / critical case sampling of firms
o Exporters and employers of scale
o Includes low margin activities
o Trade experience; further along ‘life-cycle’
o Specific personnel
o Geographic and ownership variation
o Desire for early results, efficiency
o Confidential engagement
Participants
24 firms
75,000 employees
Mean: 3,000
Min: 75
Positive response
Brexit: Reducing Complexity
“Brexit” -> “UK outside of ESM and Customs Union”
o Deliberate, worst-case scenario
Two devices to reduce complexity
o Impact Assessment Factors: twenty factors; inverse of status quo benefits free
movement of goods, services, capital and labour + level playing field
Critical/moderate/little concern to firm’s operation? Why?
Linked to EU law, rules
o Comparator Country concept: consider interaction with existing trading partner (Member of the WTO, not EU/EEA/EFTA/customs union/FTA) e.g. specific US State/Australia/New
Zealand/Mexico, also Norway, Iceland and Lichtenstein (EEA), or Switzerland (EFTA)
Preparatory or mitigation actions taken/planned
Gaps? Advice?
Market Access (11) Rules and Disciplines (5)
Imposition of trade tariffs and rules of origin Removal of application to UK of existing EU Intellectual Property regime rules
Re-establishment of physical UK border (admin; delays); no customs union /
common areas
Increased, though lawful, anti-competitive behaviour by UK enterprises or indeed
by the UK government in the areas of anti-trust and cartels, mergers and State Aid
Restrictions on establishing a company in the UK and vice-versa Removal of application of current EU competition instruments to the UK
Restrictions on providing a service in the UKDilution or removal of the right for consumers and businesses in Ireland to get
damage compensation when they are victims of anti-competitive conduct in the UK
Restrictions on receiving a service from the UK Removal of UK from jurisdiction of EU State Aid investigation procedures
No agreed rights for Irish service recipients (from the UK) and vice-versa
Restrictions investing in, and owning, companies in the UK Standards and Norms (4)
Restrictions on taking an active part in the management companies in the UKUnilateral imposition by the UK of new/different product standards, in areas such as
health, public safety, quality, and the environment
Restrictions on Irish enterprise on real estate investments or purchases, securities
investments (e.g. in shares, and bonds), granting of loans and credits, and other
financial operations in the UK (e.g. limitations on raising cheaper money in the
UK)
No mutual recognition of specifications between the UK and the Republic of
Ireland/EU
Removal / change in reciprocal Ireland/UK entitlement to look for a job, work
without needing a work permit, reside for that purpose, stay even after
employment has finished, and enjoy equal treatment with nationals in access to
employment, working conditions and all other social and tax advantages
No agreed technical specifications between the UK and the Republic of Ireland/EU
No requirement on the UK to meet minimum harmonised public procurement
rules
Inability of people working in some occupations in Ireland to have their professional
qualifications recognised in the UK
Impact Assessment Factor Link to Acquis Communautaire
Trade tariffs and rules of origin TFEU: The Internal Market: Article 26-27
Physical border; no Customs Union / Common Areas TFEU: Free Movement of Goods: Articles 28-37
Unilateral imposition of new/different product standards EU Regulation no. 1025/2012; EU Directive 2001/95/EC
No mutual recognition of specifications EU Regulation no. 1025/2012; EU Directive 2001/95/EC
No agreed technical specifications EU Regulation no. 1025/2012; EU Directive 2001/95/EC
Restrictions on establishing a company TFEU: Rights of Establishment: Articles 49-55
Restrictions on providing a service TFEU: Services: Articles 56-62
Restrictions on receiving a service TFEU: Services: Articles 56-62
No agreed rights for Irish service recipients EU Directive 2006/123/EC
Restrictions on investing in, and owning, companies in the UK TFEU Capital & Payments Articles 63-64
Restrictions on taking part in the management of companies TFEU: Rights of Establishment: Article 50
Restrictions on undertaking certain financial operations TFEU: Capital & Payments: Articles 63-64
Restrictions on free movement of labour TFEU: Workers: Articles 45-48
Inability of people to have professional qualifications recognised EU Directive 2005/36/EC
No minimum, harmonised public procurement rules EU Directive 2014/24/EU
Removal of application of Intellectual Property regime rules EU Directive 2004/48/EC
Lawful, anti-competitive behaviour by UK TFEU: Rules on Competition: Article 101
Removal of application of current EU competition instrumentsTFEU: Rules on Competition: Article 101 - 109
Compensation for anti-competitive conduct EU Directive 2014/104/EU
Jurisdiction of EU State Aid investigation procedures TFEU: Rules on Competition: Articles 107-109
Sample of Results I – Three Sector Pilot
Similar level of concern; goods, services
Market access, over rules and disciplines
Exporters vs. Locally Traded
Goods sectors: tariffs, rules, border, and standards prominent
Greatest concern in food and drink sector
Different sector, different concerns; know why
Variation in concern between firms within a sector
o Link to “international experience”?
Sample of Results II – Three Sector Pilot
1. Tariffs and rules of origin
2. Physical border; no customs union / common areas
3. Free movement of labour
4. New/different product standards
5. No mutual recognition of specifications
6. No agreed technical specifications
7. Restrictions on receiving a service
8. Lawful, but anti-competitive behaviour by UK, UK firms
TFEU, Articles 26-27; Council Decision 2013/94/EU; TFEU, Articles 28-37; TFEU, Articles
45-48 ; EU Regulations 1025/2012 and 2001/95/EC; TFEU, Articles 56-62; TFEU, Articles
101, 102, and 107
Sample of Results III – Three Sector Pilot
Pros and cons of qualitative, small-n research
o Insights
e.g. how GVA impacted; applicability of mitigation schemes; link
between transport costs and border logistics; how services are
invoiced; ‘brand-loyalty’ and ‘consumer-promise’ impacts…
o Variation in level of concern
Availability heuristic (W.Y.S.I.A.T.I.)?
Present bias, salience effects?
Prominence in discourse?
Emphasise potential for growth and for unilateral UK change
Looking Ahead / Observations
Sectoral Roundtables and bi-laterals
o Validity, robustness, trade-off sample size / richness
Moving from pilot to full analysis (June to November 2017)
o RfT issued; 15 further sectors; design modified on basis of pilot
Supplement aggregate/macro/quant analysis
Burden on research as complexity increases
o Irrationality, institutions, interests, ideology…
DISCUSSION
Dr. Cathal FitzGerald
Senior Policy Analyst
Strategic Policy Division
Department of Jobs, Enterprise, and Innovation
