According to new figures from the Drinks Industry Group of Ireland (DIGI), the impact of a hard Brexit on the drinks and hospitality sector alone could cost the Exchequer as much as €135 million in lost revenue a year.
The estimate was included in a statement entitled "The Economic Impact of Brexit on the Drinks and Hospitality Sector", which was published by DIGI with supporting analysis by DCU economist Anthony Foley.
The publication states that the lost revenue would result from a combination of hard Brexit-related factors, including reduced drinks exports to the UK, reduced British tourism, and an increase in cross-border shopping.
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According to the publication, difficulty accessing the British market due to new tariffs, an increase in wait times at the border, or other costly barriers will eat into the margins of drinks producers, especially micro-breweries and distilleries.
If a hard Brexit does occur, the value of sterling is likely to drop again, leading to a decrease in the number of British tourists patronising Irish businesses. A more attractive euro-sterling exchange rate could also lead to an increase in cross-border shopping.
DIGI’s report estimates that if Republic of Ireland citizens travel north of the border to purchase drinks products, businesses and government here could lose out on €60 million worth of expenditure.
Counteracting A Hard Brexit
To counteract the effects of a hard Brexit on the drinks and hospitality industry, ahead of Budget 2019, DIGI is calling on the government to reduce alcohol excise tax.
Ireland has the second-highest level of excise tax on alcohol in the EU. Broken down by category, Ireland has the highest tax on wine, the second highest on beer, and the third highest on spirits.
DIGI points out that a reduction in excise would serve as defensive measures in case of a hard or no deal Brexit, freeing up funds for businesses in a more restricted, regulated market while also allowing for continued growth and expansion at home and abroad.
However, a hard Brexit in a high excise environment is likely to restrict further growth and jeopardise the future of smaller drinks and hospitality businesses.
Hard Brexit Consequences
Commenting, Rosemary Garth, chairperson of DIGI and director of communications at Irish Distillers, said, “Following last week’s summit in Salzburg, the prospect of a hard or even no deal Brexit is looking increasingly likely. While this will be bad for Ireland overall, it will disproportionately affect certain industries, drinks and hospitality among them.
“A hard Brexit will inevitably lead to reduced revenue, business closures and job losses. In some areas, where the industry is the primary employer, we are looking at the possibility of a recession-type effect, whereby entire communities suffer because of a drop in product exports or tourist numbers.
“To avoid this kind of scenario, the government needs to make it as easy as possible for drinks and hospitality businesses to trade and grow. A hard Brexit alone is tough—a hard Brexit in a market with high excise tax is even tougher. High taxes mean more money is spent covering overheads before anything can be invested in productive outputs, like new premises, new products, or new staff.
“For smaller producers with limited product ranges, a bump up in excise can cost thousands of euros. That is enough to eat into their profit margins and potentially shutter them completely.
“As has so often occurred in this country’s history, when the UK sneezes, Ireland catches a cold. We are asking the government to boost this industry’s immune system now by reducing excise tax on alcohol.”
© 2018 Hospitality Ireland – your source for the latest industry news. Article by Dave Simpson. Click subscribe to sign up for the Hospitality Ireland print edition.