Latest All-island Brexit Sentiment Index

Latest All-island Brexit Sentiment Index

All-island Brexit Sentiment Index: 41% of NI SMEs have already experienced a negative impact from Brexit decision compared to 21% in ROI

Only 2% of SMEs in Northern Ireland have a Brexit plan in place compared to 6% of SMEs in ROI

  • Current sentiment in Northern Ireland remains negative at -36 (from -38 in Q3 2017), but more SMEs feel Brexit will have a negative impact on their business in the future.
  • 2 out of 3 businesses in Northern Ireland that had pre-Brexit investment plans have either reviewed, postponed or cancelled those plans.
  • In Northern Ireland, sterling’s weakness is continuing to have a major impact, with 62% of SMEs reporting a higher cost of sales.

The All-island AIB Brexit Sentiment Index for Q4 2017 reveals that despite the proposed withdrawal of United Kingdom from the European Union, the majority of SMEs both north and south of the border have yet to put a formal Brexit plan in place, with only 2% of SMEs in Northern Ireland (NI) having a formal plan and 6% in the Republic of Ireland (ROI).

The research shows that certain sectors view Brexit more negatively than others. In NI, the Retail (-45) and Hospitality & Tourism (-34) sectors continue to be the most downbeat. In the ROI meanwhile, the Manufacturing (-49) and Hospitality & Tourism (-40) sectors are reporting the most negative Brexit Sentiment.

The Index also shows that of the export focused SMEs in NI, 15% are looking into expanding into new markets with the Republic of Ireland, wider Europe and North America leading the way.

The Brexit Sentiment Index baseline is zero, with a potential range from +100 to -100. Overall, for Q4 2017, the Index registered a score of -36 for both the ROI and NI. While this ranks as an improvement on the Index score registered in Q3 2017 of -41 for the ROI and -38 for NI, it is clear that SME business leaders on the island of Ireland are still broadly negative in their outlook when it comes to the impact Brexit may have on their businesses.

When it comes to investment plans, the situation in NI is somewhat stark. Of the 44% of SMEs which had plans to invest, the survey shows that 51% have cancelled or postponed these plans while 13% are currently reviewing them. Meanwhile in ROI, of the 36% of SMEs which had plans to invest in their businesses prior to the Brexit vote, 28% are currently reviewing them, while 24% have cancelled or postponed them indefinitely.

AIB’s Brexit Sentiment Index, conducted by Ipsos MRBI, is a quarterly survey of more than 700 SMEs across the island of Ireland that assesses the attitudes of SME business leaders on Brexit and its impact on their businesses.

Commenting on the findings, Brian Gillan, Head of Business and Corporate Banking at First Trust Bank said; “The immediate impact of Brexit in Northern Ireland continues to be felt hard by our local SMEs with 41% having already experienced a negative impact compared to 21% in ROI. The second wave of AIB Brexit Sentiment Index indicates that many are concerned about the decline in consumer confidence and spending as well as the impact it is having on the costs of sales. It’s also concerning that 2 out of 3 businesses in NI that had pre-Brexit investment plans have either reviewed, postponed or cancelled those plans. I’ve no doubt that the absence of political leadership and a functioning NI Assembly is not helping business confidence in already challenging times.”

Brian Gillan continues, “Our advice to our SME customers remains consistent – review and analyse your supply chains and business operation model and prepare a Brexit plan to help identify and mitigate against any risks. Our team is on hand to assist SMEs assess their investment and expansion plans.”

AIB’s Brexit Sentiment Index also shows that the weakness of sterling is continuing to have a considerable impact on the cost of sales for SMEs in NI in particular. Some 62% of SMEs in NI report a higher cost of sales because of Brexit, with the most impacted sectors being Retail and Tourism.

AIB chief Economist Oliver Mangan explains: “The sharp depreciation of sterling over the past two years continues to be the main impact of Brexit on businesses. It is particularly acute in NI where sterling’s weakness has increased the cost of sales. Higher inflation and import costs as a result of a weak sterling are the main factors at work here.”

In addition to adverse currency fluctuations, SMEs in both NI and the ROI report that a dip in consumer confidence and spending combined with a degree of uncertainty are the main impacts Brexit is having on their businesses now. This is particularly evident amongst SMEs in NI where consumer confidence and uncertainty has overtaken currency fluctuations as the biggest factor, with 15% of SMEs citing this as a major concern.

AIB’s quarterly Brexit Sentiment Index will help inform AIB Group on the needs and solutions required by customers as plans for Brexit progress.

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