Negotiating Brexit: A Northern Ireland Perspective
In the wake of the UK triggering Article 50, the reality of Brexit looms ever larger. Ian Haldane, Managing Director of the Haldane Shiells Group, which is involved in cross border trade with the Republic and has divisions in Northern Ireland, the Isle of Man and the north west of England, spoke recently to The Hardware Journal about the implications of Brexit for the hardware and business merchants sector on the island of Ireland.
What are your main concerns as the UK and the EU embark on the Brexit process?
Ian Haldane: One of the biggest concerns for the builders merchant sector and the wider business community is the threat that significant barriers may be created to doing business between Northern Ireland and the Republic, including concerns over a hard border with all the implications that brings with it. The overarching priority must be that we find a solution which ensures that we maintain free trade. Northern Ireland and the Republic must build on what they’ve already achieved over the last two decades. I think one of the key factors in finding a workable solution is for politicians to work with business people to identify the best solutions.
One of the strongest positives in this situation is that it’s clearly in everyone’s interests to work out a viable way forward. In that context, it’s important to note that 55% of Northern Ireland’s exports are to the EU and EU countries have a trading surplus with the UK. We all need each other.
Looking at the projected two-year period in the Brexit ‘waiting room’, what, in your view, are the major implications for the hardware retailing sector in Northern Ireland during that time?
The specific implications are difficult to predict. Whatever agreement that can be negotiated will be a complex one and, in all likelihood, will come about as a result of a complex, painstaking process. There are likely to be many separate, constituent parts that will go in to making up the overall agreement. It is genuinely difficult to see how they can agree everything in a relatively short period of time and wiser minds than mine say it could take longer than two years, some say much longer. Agreement on movement of people is likely to be difficult and the agreement on trade, which is extremely important for both parties, is likely to be one of the last elements to be resolved in any agreement. One possibility is that there could be a delicate balancing act where many separate agreements are worked out and ready for sign-off, pending overall final agreement being reached.
The UK and Irish governments have indicated they are committed to avoiding a return to a so-called hard border, with the introduction of tariffs and customs, between Northern Ireland and the Republic. Do you see this commitment as realistic and, if so, what practical solutions do you foresee?
The biggest concern for Northern Ireland and the Republic is the border, of course. It’s encouraging that both the UK and Republic of Ireland governments are on record in stating their commitment to keeping an open border.
Movement of people across the border has long been in place, and I would like to believe that it will continue. I can remember the days when there was a border crossing and there were a lot of costs attached to trading between north and south. None of us want to go back to that.
Essentially there are two aspects to it, movement of people and goods and the implementation of tariffs on goods. We should look at examples of best practice internationally and adapt them. France and Switzerland, for example, seem to have a relatively smooth and straightforward system in place to facilitate the transport of goods. Advances in technology should also help. Some countries have systems in place which scan trucks as they drive through, which helps minimise delays. In terms of what sort of tariffs are put in place, obviously, that’s where negotiation will come into play to ensure that we minimise costs to business in so far as is possible.
Do you foresee volatility in exchange rates being an issue over the next two years?
Accounting for fluctuating exchange rates has long been a part of doing business for companies like ours which operate in the UK, Northern Ireland and the Republic of Ireland. Dealing with volatile exchange rates will require prudent currency hedging and careful management but it will not be a new challenge.
Haldane Fisher does business with suppliers in the Republic. How will Brexit affect those relationships?
It will be a challenge for our suppliers both north and south of the border. And as a business that has supplied products such as machine timber to the Republic, for many decades, it will be a challenge for us too. In many cases, we have decades long relationships with these companies. We have dealt with those companies when there was a hard border and we will continue to do so, tariffs permitting. Fundamentally, where business relationships are strong, I believe people find a way to do business if they can. Out of adversity, I believe, will come opportunity.
What do you think are the implications for the European regulatory framework that has built up around merchanting and the construction sector? Will there be practical implications, for instance, in relation to product and packaging markings, such as the CE mark?
In all honesty, I don’t really know the answer. A new system of standards may well revert to British regulations. Certainly, as a business, having to satisfy two regulatory frameworks would be another operational complication and would likely result in additional costs to the business. It will take some time for these issues to resolve.
How has the builders merchant sector overall in Northern Ireland been performing in the last two years? What have been the dominant trends in the marketplace?
The two most significant trends have been a steady improvement since 2013 in volumes and sales on the back of improved housing demand and a relative easing in the availability of finance for both builders and individuals taking out mortgages. Of course, borrowing terms and conditions are more heavily regulated and rightly so, but I get the impression that banks are being more realistic. The end result of all this is that Haldane Fisher has seen a greater confidence among our customers and a greater willingness to spend money and invest.
With 17 branches, the Haldane Shiells group has an influential presence in the builders merchants sector in Northern Ireland. What have been the headline product trends at your stores in the past 12 months?
With more houses being built and more construction projects commencing, increases in sales of most products have occurred. In addition, Timber Frame housing, roof trusses and other engineered timber products continue to increase in terms of market share.
What are your primary objectives for the group over the next couple of years?
I don’t believe that Brexit means that business development and expansion should not continue and we will seek to grow the business and invest in expansion where it makes sound business sense. In January we completed the purchase of Craven Timber in Leeds. And if the opportunities arise, we will certainly look at further acquisitions in the next few years. This sector is all about confidence and, at the moment, despite Brexit, there is certainly an upbeat mood and the sight of plentiful cranes over the Dublin and Belfast cityscapes underlines that positivity. While we all have good reason to be concerned about the outcome of Brexit, I am still confident that the next three or four years will be strong ones for Ireland, both north and south.
TRADE NEEDS STABILITY TO FLOURISH NIALL MURRAY, MANAGING DIRECTOR, TOPLINE TRACTAMOTORS LTD, DUBLIN ROAD, CAVAN, SHARES HIS INSIGHTS ON THE PARTICULAR PRESSURES THAT BREXIT PLACES ON BUILDERS MERCHANTS LOCATED IN CLOSE PROXIMITY TO THE BORDER.
Currency fluctuation definitely presents serious challenges for builders merchants and hardware stores in Cavan and surrounding border counties. Last year we saw a dramatic example of the serious impact that it can have on our businesses. From June 2016, our turnover trended down and our margins were under intense pressure. Northern Ireland builders merchants were able to offer discounts of up to 18% over the three months from August to October to our customers, without a loss of margin. To compensate for tougher competition, we have tightened our margins, and are working with progressive suppliers who have been able to give us some price support.
2017 AND BEYOND
It is very important for us to work with progressive suppliers who can and do react to market conditions. We are fortunate to be members of the Amalgamated Buying Group (Topline). Their buyers have been a big help in negotiating price supports with suppliers. They are also helping us to plan and run events in the store to give customers a reason to shop local. Individual business merchants cannot react quickly enough to precipitous swings in currency. As the Brexit negotiations continue over the next 2 years, it will be important for our Government to give businesses a heads up on any potential areas of concern, particularly where tariffs might be introduced or divergent legislation might be being considered which could have an impact on trade. The market will even out over time. The biggest challenge for us will be riding it out intact.
AVOIDING A HARD BORDER
From a social, political and economic point of view, the return of a hard border would be a disaster. The Good Friday Agreement has brought normalcy to trading north and south of the border. Businesses operating in border counties definitely do not want a return to the long queues at border posts, and the associated paperwork and tariffs which increase hassle and operating costs considerably. This is an important commitment for our Government to keep. This commitment is vital to north/south trade in general. A hard border encourages smuggling and black market activity, which adversely affects legitimate trade. We need a stable rate of exchange between the Euro and Sterling which, in turn, levels the playing field for all. It will also be important for the Government to be conscious of not allowing a divergence between regulations north and south. One recent example is the devastating effect that the application of a carbon tax south of the border has had on coal, briquette and peat sales. The Norwegian border control model, where cross border loads can be registered electronically, would be more desirable than physical border posts. This model would require additional Customs and Excise resources to insure compliance and discourage black market activity. I hope the Taoiseach listens to the business community and that he takes a leadership role in the negotiations with the EU to secure a special designation for the whole island of Ireland. Trade will flourish with stability.