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No-deal Brexit could lead to ‘recession-type’ decline for drinks sector

The Drinks Industry Group of Ireland (DIGI) has warned that a no-deal Brexit could have a “recession-type” effect on the drinks and hospitality sector.

The DIGI said a no-deal Brexit “could have disastrous ramifications” for Ireland’s drinks sector

Ahead of today’s (23 July) announcement of the new Conservative Party leader, the DIGI voiced its concerns over frontrunner Boris Johnson, who has not ruled out a no-deal Brexit.

Announced at midday, Johnson has been named the next UK prime minister over rival Jeremy Hunt in the Tory leadership contest.

The DIGI said that Johnson had previously claimed that the UK’s upcoming departure from the EU on 31 October may happen without a deal. This would mean that the UK and the EU will have to agree a separate bilateral trade deal, “a process that could take many years”, the DIGI warned.

The trade body said that it “could have disastrous ramifications” for Ireland, particularly for drinks and hospitality businesses that rely on “easy tariff-free access to the UK market and a stable sterling”.

Ahead of this scenario, the DIGI is urging the government to reduce excise tax on alcohol by 15% over two Budgets, with a 7.5% reduction in Budget 2020 and a further 7.5% reduction in Budget 2021.

According to DIGI’s latest report, Building a Sustainable Drinks and Hospitality Sector, which includes a survey of more than 500 DIGI members, 57% of Irish pubs rely on the UK as their main tourism market.

Ireland has the second-highest overall alcohol excise tax in the EU, with the highest excise tax on wine, the second-highest excise tax on beer, and the third highest on spirits.

According to the DIGI’s survey, 71% of publicans say the country’s high alcohol excise tax has “negatively impacted” their business in the last 12 months.

More than a third (37%) of off-licences believe they will close in the next 10 years, and 10% of rural publicans say they will reduce staff numbers this year due to “rising business costs”.

The drinks industry employs 90,000 people in pubs, restaurants, breweries, distilleries, off-licences and other supporting businesses across Ireland.

The wider hospitality sector employs more than 175,000 people, or nearly 8% of all Irish workers, and generates €1.4 billion (US$1.5bn) in exports per year.

‘Most vulnerable’  

Rosemary Garth, chair of DIGI and director of communications and corporate affairs at Irish Distillers, said: “In just a few short years, the Irish drinks and hospitality sector has experienced immense growth.

“Irish whiskey and beer are undergoing a global renaissance, and Irish pubs and restaurants remain a fixture on overseas tourists’ travel itineraries.

“That could change with Boris Johnson in number 10. His election would greatly increase the chance of a no-deal Brexit, which, by extension, would jeopardise the long-term growth prospects of Irish drinks and hospitality businesses that depend on stable British tourism and exports markets.

“A large-scale and long-term reduction in visitor numbers from the UK would have dire ‘recession-type’ effects on the drinks and hospitality sector, particularly in rural Ireland, and lead to job losses and business closures.

“Given the drinks and hospitality sector’s massive contribution not just to the Irish economy but Ireland as a tourism brand, our government must do everything in its power to reduce the grave harm that a no-deal Brexit would have on thousands of businesses and more than a hundred thousand jobs.

“By incrementally reducing excise tax on alcohol in Budget 2020 and Budget 2021, businesses, particularly the most vulnerable in rural Ireland, will have more available funds to weather the toughest moments of a no-deal Brexit, and the ability to continually invest in job creation, commercial expansion, and product and service innovation.”

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