fxcentre.aib.ie/brexit

BREXIT SENTIMENT INDEX

1 | August 2018 #backedbyAIB

Two years after the UK electorate voted to leave

the European Union and with less than eight

months to go until its official departure in March

2019, SMEs in both the Republic of Ireland

and Northern Ireland remain overwhelmingly

negative about Brexit and the prevailing uncertainty continues

to weigh on business sentiment.

The latest wave of research for AIB’s Brexit Sentiment

Index for Q2 of 2018, which was carried out by Ipsos MRBI,

registered -37 for both the Republic of Ireland and Northern

Ireland. This compares with -41 for the Republic of Ireland and

-31 for Northern Ireland in Q1 of 2018 and while this suggests

a softening in sentiment, particularly in the Republic of Ireland,

the Index has remained firmly in negative territory since the first

wave of research was carried out 12 months ago.

The AIB Brexit Sentiment for Q2 2018 remains in negative territory as SMEs express concern about Brexit’s impact on the future for their businesses and its wider economic impact.

BREXIT UNCERTAINTIES CONTINUE T0 WEIGH ON SENTIMENT

-10

-20

Source: Ipsos MRBI

BORDER EXPECTATIONS (Q2 2018)

HARD BORDER

CLOSER TO EXISTING BORDER

PLANNING FOR BREXIT (Q2 2018)

Source: Ipsos MRBI

0

Negative

Source: Ipsos MRBI

Formal Plan

Investigation Started

No Plan

-10

-20

-30

-40

-50

-36 -36

Q4 2017

-41

-38

Q3 2017

3636

-31

-41

Q1 2018

AIB BREXIT SENTIMENT INDEX* (Q2 2018)

(ROI)

(NI)

+30

+20

+10

-37

-37

Q2 2018

IMPACT ON BUSINESS NOW

ROI NI

IMPACT ON FUTURE BUSINESS

ROI NI

21% 32% 58% 61%

Positive

Negative Negative

Positive Positive

Negative Negative

Positive

5% 17%Q2

3%Q2

9%Q2 Q2

Q2 Q2 Q2 Q2

5%Q1

8%Q1

10%Q1

21%Q1

22%Q1

30%Q1

63%Q1

50%Q1

LEVEL OF VISIBILITY

ROI NI

WIDER ECONOMIC IMPACT

ROI NI

46% 70% 70% 60%

A lot

Very Limited Very Limited

A lot Positive

Negative Negative

Positive

11% 27%Q2

10%Q2

15%Q2 Q2

Q2 Q2 Q2 Q2

13%Q1

9%Q1

11%Q1

29%Q1

50%Q1

68%Q1

76%Q1

58%Q1

Source: Ipsos MRBI

NI

6%

42%

53%

5%

27%

69%

32%

68%

Lorem ipsum

15%

85%

ROI NI

NIROI

BREXIT’S NEGATIVE IMPACT ON FUTURE BUSINESS (5 YEARS +)

Source: Ipsos MRBI

Tari�s

Forex Movements

NIROI NI

Regulations

Ability to Plan

57%

51%

47%

38%

59%71%

58%

52%

46%

36%

Impact On Economy

Source: Ipsos MRBI

Source: Ipsos MRBI

YES

63%

18%

63%

25%

NO

19%12% YES / NEED MORE INFORMATION

AWARENESS OF TARIFFSROI NI

Source: Ipsos MRBI

IMPACT OF BREXIT ON INVESTMENT / EXPANSION PLANS

UNDER REVIEW

49%

7%

22%

21%

POSTPONE / CANCEL

44%57% NO CHANGE TO PLANS

37%ROI SMEs

had plans to invest or expand pre-Brexit

45%NI SMEs

had plans to invest or expand pre-Brexit

IMPACT OF BREXITOn Investment & Expansion Plans

ROI NI

Lorem ipsum

WorkingCapital

Source: Ipsos MRBI

Source: Ipsos MRBI

*The Index reflects and measures the sentiment of Irish SMEs in the Republic of Ireland and Northern Ireland towards Brexit, summarised as a single number, with a potential range from +100 to -100. It takes the difference between the positive and negative responses across four key measures: Impact on business now, Impact on future business (next 5 years), Level of visibility and, finally, the Wider economic impact of Brexit.

-10

-20

Source: Ipsos MRBI

BORDER EXPECTATIONS (Q2 2018)

HARD BORDER

CLOSER TO EXISTING BORDER

PLANNING FOR BREXIT (Q2 2018)

Source: Ipsos MRBI

0

Negative

Source: Ipsos MRBI

Formal Plan

Investigation Started

No Plan

-10

-20

-30

-40

-50

-36 -36

Q4 2017

-41

-38

Q3 2017

3636

-31

-41

Q1 2018

AIB BREXIT SENTIMENT INDEX* (Q2 2018)

(ROI)

(NI)

+30

+20

+10

-37

-37

Q2 2018

IMPACT ON BUSINESS NOW

ROI NI

IMPACT ON FUTURE BUSINESS

ROI NI

21% 32% 58% 61%

Positive

Negative Negative

Positive Positive

Negative Negative

Positive

5% 17%Q2

3%Q2

9%Q2 Q2

Q2 Q2 Q2 Q2

5%Q1

8%Q1

10%Q1

21%Q1

22%Q1

30%Q1

63%Q1

50%Q1

LEVEL OF VISIBILITY

ROI NI

WIDER ECONOMIC IMPACT

ROI NI

46% 70% 70% 60%

A lot

Very Limited Very Limited

A lot Positive

Negative Negative

Positive

11% 27%Q2

10%Q2

15%Q2 Q2

Q2 Q2 Q2 Q2

13%Q1

9%Q1

11%Q1

29%Q1

50%Q1

68%Q1

76%Q1

58%Q1

Source: Ipsos MRBI

NI

6%

42%

53%

5%

27%

69%

32%

68%

Lorem ipsum

15%

85%

ROI NI

NIROI

BREXIT’S NEGATIVE IMPACT ON FUTURE BUSINESS (5 YEARS +)

Source: Ipsos MRBI

Tari�s

Forex Movements

NIROI NI

Regulations

Ability to Plan

57%

51%

47%

38%

59%71%

58%

52%

46%

36%

Impact On Economy

Source: Ipsos MRBI

Source: Ipsos MRBI

YES

63%

18%

63%

25%

NO

19%12% YES / NEED MORE INFORMATION

AWARENESS OF TARIFFSROI NI

Source: Ipsos MRBI

IMPACT OF BREXIT ON INVESTMENT / EXPANSION PLANS

UNDER REVIEW

49%

7%

22%

21%

POSTPONE / CANCEL

44%57% NO CHANGE TO PLANS

37%ROI SMEs

had plans to invest or expand pre-Brexit

45%NI SMEs

had plans to invest or expand pre-Brexit

IMPACT OF BREXITOn Investment & Expansion Plans

ROI NI

Lorem ipsum

WorkingCapital

Source: Ipsos MRBI

Source: Ipsos MRBI

-10

-20

Source: Ipsos MRBI

BORDER EXPECTATIONS (Q2 2018)

HARD BORDER

CLOSER TO EXISTING BORDER

PLANNING FOR BREXIT (Q2 2018)

Source: Ipsos MRBI

0

Negative

Source: Ipsos MRBI

Formal Plan

Investigation Started

No Plan

-10

-20

-30

-40

-50

-36 -36

Q4 2017

-41

-38

Q3 2017

3636

-31

-41

Q1 2018

AIB BREXIT SENTIMENT INDEX* (Q2 2018)

(ROI)

(NI)

+30

+20

+10

-37

-37

Q2 2018

IMPACT ON BUSINESS NOW

ROI NI

IMPACT ON FUTURE BUSINESS

ROI NI

21% 32% 58% 61%

Positive

Negative Negative

Positive Positive

Negative Negative

Positive

5% 17%Q2

3%Q2

9%Q2 Q2

Q2 Q2 Q2 Q2

5%Q1

8%Q1

10%Q1

21%Q1

22%Q1

30%Q1

63%Q1

50%Q1

LEVEL OF VISIBILITY

ROI NI

WIDER ECONOMIC IMPACT

ROI NI

46% 70% 70% 60%

A lot

Very Limited Very Limited

A lot Positive

Negative Negative

Positive

11% 27%Q2

10%Q2

15%Q2 Q2

Q2 Q2 Q2 Q2

13%Q1

9%Q1

11%Q1

29%Q1

50%Q1

68%Q1

76%Q1

58%Q1

Source: Ipsos MRBI

NI

6%

42%

53%

5%

27%

69%

32%

68%

Lorem ipsum

15%

85%

ROI NI

NIROI

BREXIT’S NEGATIVE IMPACT ON FUTURE BUSINESS (5 YEARS +)

Source: Ipsos MRBI

Tari�s

Forex Movements

NIROI NI

Regulations

Ability to Plan

57%

51%

47%

38%

59%71%

58%

52%

46%

36%

Impact On Economy

Source: Ipsos MRBI

Source: Ipsos MRBI

YES

63%

18%

63%

25%

NO

19%12% YES / NEED MORE INFORMATION

AWARENESS OF TARIFFSROI NI

Source: Ipsos MRBI

IMPACT OF BREXIT ON INVESTMENT / EXPANSION PLANS

UNDER REVIEW

49%

7%

22%

21%

POSTPONE / CANCEL

44%57% NO CHANGE TO PLANS

37%ROI SMEs

had plans to invest or expand pre-Brexit

45%NI SMEs

had plans to invest or expand pre-Brexit

IMPACT OF BREXITOn Investment & Expansion Plans

ROI NI

Lorem ipsum

WorkingCapital

Source: Ipsos MRBI

Source: Ipsos MRBI

BRIAN KEARNS,CAMDEN GROUP, CO. ANTRIM.With a clear focus on the construction markets in

the Republic of Ireland and the UK, the Antrim-

headquartered Camden Group is now one of the largest

manufacturers of uPVC doors, windows and frames in

Ireland and the UK.

Set up by Patrick Lavery 35 years ago, it still remains a

family-owned business with a capacity to manufacture up

to 10,000 frames a week. With a continuous improvement

in its products and processes, Camden has created a

wide-ranging product portfolio for the domestic and

commercial markets that complements the sustainability

demands of many its customers while the products are

designed for longevity, maximum thermal performance,

enhanced aesthetics as well as strength and security.

According to the company’s financial controller Brian

Kearns, the company is enjoying growth and turnover for

its last financial year was up 10% while it has also grown

its workforce. Already working to full capacity, he says

the company has no immediate plans to expand beyond

its core markets.

“Since the middle of last year we have increased our

work force by 17%, we don’t currently trade internationally

and have no immediate plans to sell into Europe or

beyond, primarily because we are at full capacity meeting

the needs of our customers in Ireland and the UK,” he says.

“Every order is made bespoke, so we don’t carry any

finished stock in the factory. The majority of our business

originates from the trade industry, plus we are focused on

increasing our sales presence within the retail market.

“Brexit has had some impact on our trading, with the

company facing additional annual material cost increases

of around £1m plus as a result of the decline in the value of

sterling. We purchase raw materials from Europe and the Far

East, where materials costs are priced in Euros and Dollars, so

the weakening of the sterling against both those currencies

since June 2016 has had a major effect. We have some

Euro-based sales and we try to use this natural hedge, but it

doesn’t cover all our Euro expenditure,” he adds.

He says that the possibility of a hard border between

Northern Ireland and the Republic of Ireland is a major

concern for a lot of businesses. “No one wants a return

to a hard border, especially not businesses like ours that

trade across the Island of Ireland,” he says

The Camden Group has been banking with First Trust

Bank since 2015 and Brian adds that the bank has been

very supportive in enabling the recent growth of the

business. Concluding he said: “First Trust is an excellent

business partner, both in terms of providing business

banking services and growth funding.” ■

CUSTOMER VIEW

With little progress in the

negotiations between the

UK government and the EU

over the terms of the planned

withdrawal, the prevailing

uncertainty is clearly feeding

back into business sentiment

among many SMEs in both

jurisdictions, each of which have their own

unique concerns.

For SMEs in the Republic of Ireland, the

negative sentiment is largely being driven

by how they feel Brexit will impact on their

businesses in the future and the wider impact

it will have on the economy. Some 58% of

SMEs in the Republic of Ireland, for example,

believe Brexit will have a negative impact on

future business. In terms of its wider economic

impact, 70% believe that it will ultimately have

a negative impact on the economy.

For SMEs in Northern Ireland, the level

of visibility around Brexit is cited as one of

the main issues with 70% of firms surveyed

admitting that they had very limited visibility.

In addition, some 60% believe that it will have

a negative impact on the wider economy,

up from 58% in Q1 of 2018. Given that SMEs

in Northern Ireland are already feeling

the impact of currency fluctuations, more

businesses (32%) are already feeling the

effects of Brexit now compared to just 21% of

SMEs south of the Border.

“The Brexit sentiment index remains deep in

negative territory in Q2 2018, at -37 for both ROI

and NI SME’s. A key point to note though is the

relative stability in these readings over recent

surveys. This is reflective of the lack of any major

new developments over the survey period

in the Brexit process. There has also been a

much less eventful currency

market backdrop, with EUR/

GBP trading in a tight 87-88p

range over the survey period.

As a result, there has been little

to influence sentiment in one

direction or another. It will be

interesting to see, though, if

the renewed weakening of sterling over the

summer months, which has seen the EUR/

GBP move back up to 90p, has any impact

on survey readings for the third quarter,” says

Oliver Mangan, AIB Chief Economist.

“Another important feature of the survey

is that around three quarters of SMEs in ROI

and two-thirds of firms in NI state that Brexit is

having no impact on their business currently.

Further, in ROI 82% of firms report that sales

have not been impacted as of yet, while in

NI, the comparative figure is 74%. From a

sectoral viewpoint, the area most impacted

by Brexit to date is tourism in ROI while in NI

the sector reporting the largest impact at this

point is food and drink,” he adds.

“While a somewhat limited proportion of

SMEs are reporting a negative impact on

business now, the lack of progress and

clarity in relation to Brexit and the associated

uncertainty is also evident in the survey results.

Indeed, in ROI, the negative headline reading

Oliver Mangan, AIB Chief Economist

“The lack of progress and clarity in relation to Brexit and the associated uncertainty is evident in the survey results.”

BREXIT SENTIMENT INDEX

2 | August 2018 #backedbyAIB

-10

-20

Source: Ipsos MRBI

BORDER EXPECTATIONS (Q2 2018)

HARD BORDER

CLOSER TO EXISTING BORDER

PLANNING FOR BREXIT (Q2 2018)

Source: Ipsos MRBI

0

Negative

Source: Ipsos MRBI

Formal Plan

Investigation Started

No Plan

-10

-20

-30

-40

-50

-36 -36

Q4 2017

-41

-38

Q3 2017

3636

-31

-41

Q1 2018

AIB BREXIT SENTIMENT INDEX* (Q2 2018)

(ROI)

(NI)

+30

+20

+10

-37

-37

Q2 2018

IMPACT ON BUSINESS NOW

ROI NI

IMPACT ON FUTURE BUSINESS

ROI NI

21% 32% 58% 61%

Positive

Negative Negative

Positive Positive

Negative Negative

Positive

5% 17%Q2

3%Q2

9%Q2 Q2

Q2 Q2 Q2 Q2

5%Q1

8%Q1

10%Q1

21%Q1

22%Q1

30%Q1

63%Q1

50%Q1

LEVEL OF VISIBILITY

ROI NI

WIDER ECONOMIC IMPACT

ROI NI

46% 70% 70% 60%

A lot

Very Limited Very Limited

A lot Positive

Negative Negative

Positive

11% 27%Q2

10%Q2

15%Q2 Q2

Q2 Q2 Q2 Q2

13%Q1

9%Q1

11%Q1

29%Q1

50%Q1

68%Q1

76%Q1

58%Q1

Source: Ipsos MRBI

NI

6%

42%

53%

5%

27%

69%

32%

68%

Lorem ipsum

15%

85%

ROI NI

NIROI

BREXIT’S NEGATIVE IMPACT ON FUTURE BUSINESS (5 YEARS +)

Source: Ipsos MRBI

Tari�s

Forex Movements

NIROI NI

Regulations

Ability to Plan

57%

51%

47%

38%

59%71%

58%

52%

46%

36%

Impact On Economy

Source: Ipsos MRBI

Source: Ipsos MRBI

YES

63%

18%

63%

25%

NO

19%12% YES / NEED MORE INFORMATION

AWARENESS OF TARIFFSROI NI

Source: Ipsos MRBI

IMPACT OF BREXIT ON INVESTMENT / EXPANSION PLANS

UNDER REVIEW

49%

7%

22%

21%

POSTPONE / CANCEL

44%57% NO CHANGE TO PLANS

37%ROI SMEs

had plans to invest or expand pre-Brexit

45%NI SMEs

had plans to invest or expand pre-Brexit

IMPACT OF BREXITOn Investment & Expansion Plans

ROI NI

Lorem ipsum

WorkingCapital

Source: Ipsos MRBI

Source: Ipsos MRBI

CUSTOMER VIEW AIDAN COMERFORD,COMERFORD BROTHERS, CO. KILDARE.Set up in the 1950s by Dan Comerford, the Newbridge-

based Comerford Brothers has established itself as one of

the leading bakeries in Ireland having developed a strong

retail presence across Ireland and through its relationships

with leading retailers like Lidl.

The third generation of the Comerford family are still

actively involved in the business including sales manager

Aidan Comerford, whose father and two uncles are on

the board of directors and who runs the company with his

two brothers, John and Fintan. The bakery specialises in

products that can be found in the ambient cake section of

supermarkets, including Lidl which has been a customer

since the early part of the last decade. Lidl has also been

instrumental in helping the company increase its presence

in both the Irish and the UK market. According to Aidan

Comerford, turnover is expected to be in the region of €17m

this year and the company employs more than 100 people

with sales split evenly between domestic and export markets

- the later comprising almost exclusively of UK sales.

Exports to the UK have been the major driver of growth in

the business over the last 6-7 years, but Aidan says the fall in

the value of Sterling following the June 2016 EU referendum

has had a significant impact by reducing the value of sales

made in the UK currency. “Encouragingly, the political

uncertainty around the future relationship between the UK

and the EU has not had a negative impact on the retail sector,”

he says. “We are still tendering for contracts that extend

beyond March 2019 and we are working on long-terms plans.

We have detected no reluctance on the part of these retailers

to work with us,” says Aidan. He says the company has used

natural hedging to reduce its costs wherever possible but

admits that the competitive environment post-Brexit will

determine the long-term effect on the business.

“It all boils down to our costs compared to the cost of doing

business in the UK,” he explains. “If they are similar we can

gain a competitive edge from the quality of our product,

but if it costs us 10% more to produce a similar product than

our competitors in the UK, it will be challenging,” he adds.

He says the company has looked at expanding its business

into continental Europe, but differing tastes make it difficult

to cater for customers across so many different countries. “It

took us 15 years to crack the UK market,” admits Aidan.

Comerford Brothers has been producing bakery products

for a long time and for most of that time it has banked with

AIB, he says. “We have been an AIB business customer for

more half a century and the bank has been particularly

helpful in terms of providing access to business information

that has helped us deal with issues such as currency

fluctuation,” he concludes. ■

-10

-20

Source: Ipsos MRBI

BORDER EXPECTATIONS (Q2 2018)

HARD BORDER

CLOSER TO EXISTING BORDER

PLANNING FOR BREXIT (Q2 2018)

Source: Ipsos MRBI

0

Negative

Source: Ipsos MRBI

Formal Plan

Investigation Started

No Plan

-10

-20

-30

-40

-50

-36 -36

Q4 2017

-41

-38

Q3 2017

3636

-31

-41

Q1 2018

AIB BREXIT SENTIMENT INDEX* (Q2 2018)

(ROI)

(NI)

+30

+20

+10

-37

-37

Q2 2018

IMPACT ON BUSINESS NOW

ROI NI

IMPACT ON FUTURE BUSINESS

ROI NI

21% 32% 58% 61%

Positive

Negative Negative

Positive Positive

Negative Negative

Positive

5% 17%Q2

3%Q2

9%Q2 Q2

Q2 Q2 Q2 Q2

5%Q1

8%Q1

10%Q1

21%Q1

22%Q1

30%Q1

63%Q1

50%Q1

LEVEL OF VISIBILITY

ROI NI

WIDER ECONOMIC IMPACT

ROI NI

46% 70% 70% 60%

A lot

Very Limited Very Limited

A lot Positive

Negative Negative

Positive

11% 27%Q2

10%Q2

15%Q2 Q2

Q2 Q2 Q2 Q2

13%Q1

9%Q1

11%Q1

29%Q1

50%Q1

68%Q1

76%Q1

58%Q1

Source: Ipsos MRBI

NI

6%

42%

53%

5%

27%

69%

32%

68%

Lorem ipsum

15%

85%

ROI NI

NIROI

BREXIT’S NEGATIVE IMPACT ON FUTURE BUSINESS (5 YEARS +)

Source: Ipsos MRBI

Tari�s

Forex Movements

NIROI NI

Regulations

Ability to Plan

57%

51%

47%

38%

59%71%

58%

52%

46%

36%

Impact On Economy

Source: Ipsos MRBI

Source: Ipsos MRBI

YES

63%

18%

63%

25%

NO

19%12% YES / NEED MORE INFORMATION

AWARENESS OF TARIFFSROI NI

Source: Ipsos MRBI

IMPACT OF BREXIT ON INVESTMENT / EXPANSION PLANS

UNDER REVIEW

49%

7%

22%

21%

POSTPONE / CANCEL

44%57% NO CHANGE TO PLANS

37%ROI SMEs

had plans to invest or expand pre-Brexit

45%NI SMEs

had plans to invest or expand pre-Brexit

IMPACT OF BREXITOn Investment & Expansion Plans

ROI NI

Lorem ipsum

WorkingCapital

Source: Ipsos MRBI

Source: Ipsos MRBI

is being driven by concerns regarding the

impact of business in the future and on the

wider economic impact. In terms of NI, the level

of visibility is the main drag on sentiment. These

concerns over the lack of visibility appears to

be having an impact on investment decisions

in NI, with around 50% of investment plans

being postponed or cancelled due to Brexit,”

says Oliver.

“Since the June research period of this

wave of AIB’s Brexit Sentiment Index, political

events in the UK related to its Brexit plans and

negotiations have left many Irish businesses

more concerned about the direction of Brexit

and its potential impact. In this wave of

research, Brexit Sentiment, while marginally

improved (-37), is still negative

underpinned by concerns

regarding the impact on the

business in the future and on

the wider economic impact.

Manufacturing, retail and tourism

sectors continue to report the

most negative Brexit sentiment,”

says Catherine Moroney, Head of

Business Banking, AIB.

“In this wave, we have probed further on

the ways in which businesses are concerned

that Brexit may impact business in the future.

Businesses in ROI reported the impact on the

economy (-64), tariffs (-56), exchange rate

movements (-46) and regulations (-42) as the

main issues. It is surprising and somewhat

concerning that business cash flow and

working capital emerged as much less of a

concern (-26), with most SMEs of the view that

Brexit will have no impact on business cash

flow. This suggests that while businesses are

broadly aware of the macro impact of Brexit,

they may have not sufficiently quantified the

financial impact on their own businesses cash

flow and on working capital requirements.

These macro issues would undoubtedly impact

on cash flow and working capital for many

businesses,” she adds.

“The index indicates that overall there has

been no increase in the proportion of those

ROI businesses with a formal Brexit plan

(6%). A higher percentage of businesses in

food and drink (11%), tourism

(9%) and transport (7%) sectors,

however, have formal Brexit

plans. The results also indicate

that larger businesses are more

likely to have a formal Brexit plan

in place, albeit planning among

larger businesses still appears

worryingly low,” says Catherine.

With less than eight months to

go until the UK formally leaves the EU, she says

it is of paramount importance that businesses

start to plan for Brexit as soon as possible.

“We would encourage all SMEs to take the

Irish Government’s lead and to put in place

very specific contingency plans for a worst-

case scenario Brexit. Whilst we can still hope

Catherine Moroney, Head of Business Banking, AIB

BREXIT SENTIMENT INDEX

3 | August 2018 #backedbyAIB

HOW CAN WE HELP?

AIB, Republic of Ireland Visit your local AIB branch or 1890 47 88 33

(8am - 9pm weekdays, 9am - 6pm Saturdays)

First Trust, Northern Ireland Brian Gillan, Head of Business and Corporate Banking brian.m.gillan@aib.ie 028 904 79206

THE NORTHERN IRELAND PERSPECTIVE

The AIB Brexit Sentiment Index is based on detailed telephone interviews conducted by Ipsos MRBI from its call centres in Dublin and Belfast amongst 500 SMEs in the Republic of Ireland and 200 in Northern Ireland, operating in a number of key defined sectors.

-10

-20

Source: Ipsos MRBI

BORDER EXPECTATIONS (Q2 2018)

HARD BORDER

CLOSER TO EXISTING BORDER

PLANNING FOR BREXIT (Q2 2018)

Source: Ipsos MRBI

0

Negative

Source: Ipsos MRBI

Formal Plan

Investigation Started

No Plan

-10

-20

-30

-40

-50

-36 -36

Q4 2017

-41

-38

Q3 2017

3636

-31

-41

Q1 2018

AIB BREXIT SENTIMENT INDEX* (Q2 2018)

(ROI)

(NI)

+30

+20

+10

-37

-37

Q2 2018

IMPACT ON BUSINESS NOW

ROI NI

IMPACT ON FUTURE BUSINESS

ROI NI

21% 32% 58% 61%

Positive

Negative Negative

Positive Positive

Negative Negative

Positive

5% 17%Q2

3%Q2

9%Q2 Q2

Q2 Q2 Q2 Q2

5%Q1

8%Q1

10%Q1

21%Q1

22%Q1

30%Q1

63%Q1

50%Q1

LEVEL OF VISIBILITY

ROI NI

WIDER ECONOMIC IMPACT

ROI NI

46% 70% 70% 60%

A lot

Very Limited Very Limited

A lot Positive

Negative Negative

Positive

11% 27%Q2

10%Q2

15%Q2 Q2

Q2 Q2 Q2 Q2

13%Q1

9%Q1

11%Q1

29%Q1

50%Q1

68%Q1

76%Q1

58%Q1

Source: Ipsos MRBI

NI

6%

42%

53%

5%

27%

69%

32%

68%

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15%

85%

ROI NI

NIROI

BREXIT’S NEGATIVE IMPACT ON FUTURE BUSINESS (5 YEARS +)

Source: Ipsos MRBI

Tari�s

Forex Movements

NIROI NI

Regulations

Ability to Plan

57%

51%

47%

38%

59%71%

58%

52%

46%

36%

Impact On Economy

Source: Ipsos MRBI

Source: Ipsos MRBI

YES

63%

18%

63%

25%

NO

19%12% YES / NEED MORE INFORMATION

AWARENESS OF TARIFFSROI NI

Source: Ipsos MRBI

IMPACT OF BREXIT ON INVESTMENT / EXPANSION PLANS

UNDER REVIEW

49%

7%

22%

21%

POSTPONE / CANCEL

44%57% NO CHANGE TO PLANS

37%ROI SMEs

had plans to invest or expand pre-Brexit

45%NI SMEs

had plans to invest or expand pre-Brexit

IMPACT OF BREXITOn Investment & Expansion Plans

ROI NI

Lorem ipsum

WorkingCapital

Source: Ipsos MRBI

Source: Ipsos MRBI

-10

-20

Source: Ipsos MRBI

BORDER EXPECTATIONS (Q2 2018)

HARD BORDER

CLOSER TO EXISTING BORDER

PLANNING FOR BREXIT (Q2 2018)

Source: Ipsos MRBI

0

Negative

Source: Ipsos MRBI

Formal Plan

Investigation Started

No Plan

-10

-20

-30

-40

-50

-36 -36

Q4 2017

-41

-38

Q3 2017

3636

-31

-41

Q1 2018

AIB BREXIT SENTIMENT INDEX* (Q2 2018)

(ROI)

(NI)

+30

+20

+10

-37

-37

Q2 2018

IMPACT ON BUSINESS NOW

ROI NI

IMPACT ON FUTURE BUSINESS

ROI NI

21% 32% 58% 61%

Positive

Negative Negative

Positive Positive

Negative Negative

Positive

5% 17%Q2

3%Q2

9%Q2 Q2

Q2 Q2 Q2 Q2

5%Q1

8%Q1

10%Q1

21%Q1

22%Q1

30%Q1

63%Q1

50%Q1

LEVEL OF VISIBILITY

ROI NI

WIDER ECONOMIC IMPACT

ROI NI

46% 70% 70% 60%

A lot

Very Limited Very Limited

A lot Positive

Negative Negative

Positive

11% 27%Q2

10%Q2

15%Q2 Q2

Q2 Q2 Q2 Q2

13%Q1

9%Q1

11%Q1

29%Q1

50%Q1

68%Q1

76%Q1

58%Q1

Source: Ipsos MRBI

NI

6%

42%

53%

5%

27%

69%

32%

68%

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15%

85%

ROI NI

NIROI

BREXIT’S NEGATIVE IMPACT ON FUTURE BUSINESS (5 YEARS +)

Source: Ipsos MRBI

Tari�s

Forex Movements

NIROI NI

Regulations

Ability to Plan

57%

51%

47%

38%

59%71%

58%

52%

46%

36%

Impact On Economy

Source: Ipsos MRBI

Source: Ipsos MRBI

YES

63%

18%

63%

25%

NO

19%12% YES / NEED MORE INFORMATION

AWARENESS OF TARIFFSROI NI

Source: Ipsos MRBI

IMPACT OF BREXIT ON INVESTMENT / EXPANSION PLANS

UNDER REVIEW

49%

7%

22%

21%

POSTPONE / CANCEL

44%57% NO CHANGE TO PLANS

37%ROI SMEs

had plans to invest or expand pre-Brexit

45%NI SMEs

had plans to invest or expand pre-Brexit

IMPACT OF BREXITOn Investment & Expansion Plans

ROI NI

Lorem ipsum

WorkingCapital

Source: Ipsos MRBI

Source: Ipsos MRBI

“The passage of time since we

undertook the first wave of this all-

island Brexit Sentiment research has

done little to change the views

of Northern Ireland businesses with

the latest Sentiment reading of

-37 compared to – 38 in September

2017,” says Brian Gillan, Head

of Business and Corporate Banking,

First Trust Bank.

“This can largely be explained by

the apparent lack of tangible progress

in the Brexit negotiations since this

tracking survey began,” he adds.

More recent political developments,

however, will likely feed back into

future sentiment measured by the next

wave of research for Q3, 2018.

“It will also be interesting to see

if these political developments,

just before the Westminster recess,

change people’s views of whether we

can expect a hard border or not on

the island of Ireland. When this latest

research was completed, the vast

majority of businesses on both sides

of the border did not expect a hard

border with only 15% of NI businesses

thinking this was likely. Such is the

fast-changing nature of Brexit politics,

it will be interesting to see if this view

changes over the next wave of the

Brexit Sentiment research,” he says.

For many SMEs in Northern Ireland,

however, the lack of visibility and

its impact on their investment and

expansion plans is a cause for concern.

“The overall Brexit sentiment trend is

something which only goes to reinforce

the main source of negativity for NI

businesses, identified as the lack of

visibility as to what Brexit means for

them – with some 89% suggesting

visibility was either limited or very

limited. There is little doubt that this

lack of certainty is impacting investment

decisions here – with now one in two

investment or expansion plans being

postponed or cancelled as a direct

result of Brexit. This is a worrying trend

which, if it continues, will have a long-

term impact on the competitiveness of

our local businesses, especially those

operating in export markets,” he says.

“Dealing with the here and now, more

NI businesses appear to be feeling

the negative impact of Brexit with

sentiment resting at 32% compared

to 21% in the Republic of Ireland.

While the Index shows some signs of

improvement on the impact of input

costs, cost competitiveness and profit

margins are still being challenged by

Brexit here in Northern Ireland.

“Looking forward, concerns

regarding the impact of Brexit on the

economy and consumer confidence

are shared by NI and ROI businesses,

however the potential for Brexit to

increase costs as well as concerns about

future tariffs are major concerns for NI

businesses,” he adds.

The lack of planning for Brexit among

many SMEs is another worrying trend,

according to Brian.

“Given the continued uncertainty it

is hardly surprising that planning for

Brexit remains worryingly low, with 69%

not having started and only 5% having a

formal plan in place. This seems to be

influenced by company size with the

number of smaller companies starting

investigations much lower. Interestingly

Food & Drink companies are more likely

to be planning for Brexit, which given

the importance of the sector to the local

economy is encouraging.

“We would strongly urge companies

of all sizes to start the process

of understanding the potential

implications of Brexit for them – and

seek help wherever its available

– whether through local advisers

or through Brexit preparation

programmes being delivered by

the likes of InterTradeIreland,”

he concludes. ■

for and support a better outcome, we have to be ready for the worst case - it’s

critical to plan for the worst now . When businesses do seek financing, one of

the key questions we in AIB ask them about is their business’ Brexit readiness

and the potential impact Brexit may have on their businesses in a harder line

Brexit scenario,” she says.

She also points out that, in advance of Brexit, many SMEs in both the Republic

of Ireland and Northern Ireland have started to explore new European markets

as a way of mitigating some of the risks associated with Brexit.

“Our Brexit Sentiment Index research in Q4 2017 showed that 1 in 5 Irish

exporters were considering new markets. To support our customers who

are increasing their market reach, and those with exposure to the UK, AIB

has launched a free export credit check in collaboration with Euler Hermes.

This is a free risk assessment on five potential or existing overseas clients to

provide greater peace of mind to gauge if trading with these clients, you will

get paid. We have also put a €122m SBCI Brexit Loan in place to support

short term investment and working capital. Our local Brexit Advisors are

in place to support and assist businesses to navigate through Brexit and I

would encourage businesses to contact their local AIB to discuss how we can

support their Brexit readiness,” she concludes. ■

Brian Gillan, Head of Business and Corporate Banking,

First Trust Bank.

fxcentre.aib.ie/brexit Allied Irish Banks, p.l.c. is regulated by the Central Bank of Ireland4 | August 2018 #backedbyAIB

BREXIT SENTIMENT INDEX