How Brexit Could Affect Your Business

The UK Government has set 23rd June 2016 as the date for its “In-Out” referendum vote on Britain’s continued membership of the EU. Opinion polls are pointing to a very close outcome, and an “Out” result would undoubtedly change the landscape for business owners in Ireland, writes Oliver Mangan, Chief Economist at AIB.

The UK EU referendum issue has now moved centre stage in the UK. We view it as the primary event risk for the UK and Ireland in 2016, as a vote to leave the EU would have profound economic and political consequences for both countries. It is now a 50/50 call, in our view, on whether the UK votes to leave or remain in the EU.

Impact on the UK Economy – Uncertainty About Trade Agreements

Most studies show that leaving the EU would have a negative impact on the UK economy. It could take up to a decade for the full economic impact to be felt in terms of foreign direct investment (FDI), trade flows, migration etc. There would obviously be negative knock-on effects for Ireland given its close ties with the UK.

 

The critical question centres around what type of trade arrangements would be put in place between the UK and EU post a Brexit. The more the UK seeks to regain control over policy and regulations, the more difficult it will be for it to negotiate a worthwhile trade deal with the EU. In order to secure a preferential trade deal, the UK is likely to have to adhere to EU rules and regulations.
It would be a major drawback for the UK if it had to fall back on World Trade Organization (WTO) rules, which is likely to involve the imposition of trade tariffs. Some 45% of UK exports go to the EU, so it is a vital market. On the other hand, the UK takes just 10% of EU exports. Thus, the UK is not as vital to the EU for trade as the EU is to the UK.
Trade Impact on Ireland

Ireland has very close trade and economic links with the UK and so would be greatly impacted by Brexit. Those trading with the UK, at a minimum, would face increased administrative and regulatory costs and possibly tariffs. A recent ESRI report suggests that there could also be a significant decline in bilateral trade. Sectors such as agriculture, retailing, energy and financial services are likely to be most impacted by Brexit.
The main Irish exports to the UK are food, pharma, ICT and a broad range of services, while on the import side, energy, manufactured goods and services are all important. Ireland is the UK’s fifth largest export market. Some 33% of Ireland’s imported goods come from the UK. It is worth noting that more goods are imported into Ireland from the UK than the rest of the EU combined.

Domain names were of little concern to businesses

It seems like a distant memory now, particularly to companies founded to service just those needs – companies such as Carlow-based Blacknight. Providing domain name registration services and website hosting, Blacknight owns numerous servers (read big computers) that are connected to the internet all the time.

The company, which is 100% Irish owned and based, opened its own data centre in Carlow in 2014 (home to those servers that are connected to the internet) in addition to data centre space in Dublin.

Realistically, Blacknight is competing globally, as people can buy domain names and hosting anywhere. But this works both ways, and it now has 80,000 customers in 130 countries.

Officially incorporated in 2003, the company started out in 2000 when Michele was a student at University of Limerick. As is the case with many tech companies, Blacknight started in its founder’s bedroom. Michele subsequently met business partner Paul Kelly online; the first time they met in person was to sign the documents. The company was established in Carlow because that’s where Paul was based when Michele moved back from Italy, where he was working at the time.

Becoming an ICANN-accredited registrar has been important for Blacknight as it means cutting out the middle man and being able to supply services others can’t, for example, instead of a “.com” customers can buy a “.irish”.

 

Interview with Michele Neylon

 

What was the inspiration for setting up your business?

I was at UL studying European Studies with Languages around the time the internet was taking off in many respects. I knew a little about computers, and started doing web pages for some of the departments in the Humanities College in UL. It morphed into something whereby I was doing it for other companies. I struck a deal with a company in Canada where I was getting space on its servers; it was a basic reseller concept. They’d give me space and I’d sell it on. Their service had issues. The choice I had was very simple: stop offering these services or find some way of not leaving customers in the lurch. At that point I got my dedicated server and realised there was a business opportunity in providing the hosting for the websites and email, but not getting involved in the design and development. I was working in Milan teaching English as a foreign language. In the summer of 2003 I decided I had to do this seriously.

 

How did you initially fund your business?

We begged, we borrowed. We didn’t have any external funding. Going back to 2003, we had several servers we were paying for out of our own pockets. Over time, once there was enough revenue, they managed to cover themselves. Paul took a small personal loan – a four-figure sum – in 2003 to buy some hardware. We were self-funding and didn’t rely on third parties. On one hand it was a limiting factor. Anything we were doing was sustainable. Over time, you discover you need more cash to be able to do things: buy better servers, invest in better infrastructure. At that stage it was tough. Financial institutions and enterprise boards didn’t really understand what we were doing.

 

Have you diversified your offering from your original focus or set up other businesses?

You have to diversify or you die. You have to evolve. As businesses’ usage of technology and the internet has evolved, so have the services we offer. What we try to do is bridge the gap. If we have a client who is happy to come to us for a variety of services and then asks if we do something in particular, we will see if we can offer it.

Managing Your Time

Time – it’s a precious commodity. While no one ever seems to have enough of it, some people manage to accomplish far more than others in the same 24 hours. When it comes to time management, entrepreneurs have special concerns.

Providing both vision and leadership, entrepreneurs know that the success or failure of their businesses depends on them. As a result, many find themselves working a staggering number of hours. They say they will slow down after making it over the next hurdle. But another hurdle always appears. Running at such a fast clip may bring short-term results, but those gains can be lost quickly through ill health or divorce. Learning to use your time more efficiently not only helps you achieve a healthier balance between your business and personal lives but it can also save your business from missed deadlines, overtime wages, lost customers and more. Putting in more hours isn’t the key to success. Managing your time more effectively is. You’ll be more productive in fewer hours and live a happier, healthier life as a result.

 

 1. Work towards larger life goals

The first step in effective time management is to determine where exactly you want to go. Without a clear picture of your destination, you’ll wind up someplace else. Think long-term: What do you want to achieve by the end of your life? Or even at the end of this decade? Write it down and be as specific as possible. Then determine what steps you must take to meet your goals. Write these down too.

Next, keep a time log of everything you do for at least a week, preferably a month. Note the number of hours or minutes you spend on each work project, meeting, phone call or other activity. Log activities as they occur; just doing it a few times a day results in missing important details.

 

2. Figure out where you are spending your time

Compare your time log to your life goals. The majority of your time should be spent on activities contributing to the realisation of your goals. Make a note of any activities not directed towards this end, and try to eliminate them. It might be better, for example, to discharge a difficult client whose projects stray from your company’s core business, and instead put more effort into marketing and finding new clients. Consider ways to streamline the tasks you are obliged to do: for instance, you can sometimes accomplish just as much with a teleconference as a lunch meeting. Say no to any new endeavours unless they somehow support your goals.

 

3. Delegate

Don’t hesitate, as many entrepreneurs do, to delegate some of your tasks. One print shop owner, who was putting in 90 hours a week, was so discouraged he was ready to close down his business. He couldn’t give additional responsibility to his employees, he said, because they were not experienced enough. Then a health crisis kept him out of the shop for several weeks. In his absence, those same employees performed extremely well.

A major external risk for the Irish agriculture sector

The UK represents our most important agri-food export market, accounting for over 40% of Irish agricultural output. It is the destination for over 50% of our beef and 60% of our cheese exports. By comparison, it accounts for 15% of exports across all sectors. It is a high value market, and its customers share the same language and similar consumer preferences. For small and medium businesses in Ireland, the UK is generally the first destination they look to as a potential export market.

Should the UK vote to leave the EU, Irish agriculture would undoubtedly feel negative consequences, both in the short-term and longer term. Already in 2016, we have seen a weakening of Sterling by over 7% against the euro, arising mainly from the uncertainty on the referendum outcome. This has reduced the competitiveness of Irish exports, with a disproportionate impact on the Irish agri-food sector.

In the longer term, the uncertainties presented by the changed trading relationship between the UK and EU pose a significant threat, as the costs of trading with the UK would, inevitably, rise.

 

Special Agreement

As part of the EU trading bloc, Ireland is not in a position to negotiate any special bilateral trade agreement with the UK. We would therefore be bound by whatever trade agreement was reached between the EU and UK.

It has been suggested that the UK would negotiate a trading arrangement with the EU similar to that of Norway, which has access to the EU Single Market, and makes a financial contribution to the EU. However, it should be noted that, under this arrangement, many agricultural products are outside the Single Market agreement, with restrictions in place in the form of tariff quotas and regulatory, non-tariff barriers (import licenses, rules of origin checks). The reintroduction of these barriers would increase costs, reduce the competitiveness of Irish exports and, ultimately, reduce the potential the UK holds as a destination for Irish agri-food exports.

 

Impact in UK and Northern Ireland

For farmers in the UK and Northern Ireland, the reintroduction of trade barriers could have similarly negative consequences, as tariff and quota restrictions could undermine their ability to export to Ireland and to the EU. Ireland remains the main export market for the UK agri-food sector, with almost €3.5bn of exports annually. UK farmers would also face an uncertain future for agriculture supports, as it is unknown what domestic support payments, and at what level, would replace the current EU CAP payments.

Start ups are Choosing Galway

Galway isn’t just a great place to live; it’s an ideal location for entrepreneurs who are starting their own businesses. John Breslin (Senior Lecturer, NUI Galway and Director, TechInnovate) outlines why start-ups are increasingly choosing Galway as their place of business.

Galway is an excellent base for start-ups. It’s compact enough to walk around most of the city area; it’s a college town with a young feel to it and lots of skilled talent; it’s multicultural; there’s lots to do within a one-hour drive of the place, from the Burren to Connemara; and it has a diverse tech ecosystem between the ICT and medtech sectors. One thing that was missing up until now was a downtown innovation cluster (like Dublin’s Digital Hub or Silicon Docks), with a density of creative, innovative and entrepreneurial types. But we are working to make that happen and to allow start-ups to flourish in proximity to transport, cafés and restaurants and shops, the harbour and the sea, and everything else that Galway has to offer (the PorterShed innovation hub, backed by AIB, is part of this effort).

Here are a few more reasons why start-ups should choose, and are choosing, Galway.

 

1. Friendly and Welcoming to Entrepreneurs

Galway has a long tradition of welcoming tourists and visitors – so much so that it was recently named as the “Friendliest City in the World” by Travel and Leisure Magazine – and that welcome is now being extended to entrepreneurs who want to start here and others who want to join existing start-ups here. This is being accomplished by the emergence of coworking spaces with seats for visitors, new start-up incubators, and initiatives like Enterprise Ireland’s dedicated competitive start-up fund for the West of Ireland. These initiatives, combined with the quality of life and the range of larger companies already present in the Galway tech ecosystem, makes it an exciting and enjoyable place to found, or be part of, a start-up.

 

2. Tech and Medtech Ecosystems

We are seeing closer cooperations between the multinationals and relevant start-ups in their space and related spaces – knitting together the ecosystems. Galway is a global medtech hub, with eight out of the top 10 medtech companies having operations on its doorstep. There have been some great indigenous medtech successes, with Embo (a spinout from BioInnovate) raising €3M in cash, and others like Apica and Creganna being acquired for tens or hundreds of millions. Similarly, there are exciting companies emerging in the ICT space: ExOrdo’s research conference management solution is contracted to major US corporates and is a preferred provider for IEEE conferences; Pocket Anatomy in Galway won The Next Web top start-up award for their 3D app of the human body and joined the US StartUp Health Academy; Birdleaf.io are gaining attention for their platform that provides customer demographics from email addresses; and BuilderEngine have a fantastic CMS offering to rival WordPress and Drupal that features easy-to-use inline editing and ecommerce functionality.

 

3. Downtown Hubs in “Silicon Square”

As with all capital cities, Dublin is where most of the start-up activity is happening. However, rents are overheating in the capital (for both company space and employee accommodation) and don’t show any immediate signs of cooling. Fortunately there are various efforts underway to make the regions more attractive to start-ups. One such example is the Galway City Innovation District, which we are currently kicking off with a new downtown innovation hub – the Portershed, backed by AIB.