As an exporting nation, Ireland really couldn’t be in a better place. We have a strong and enduring relationship with both the US and the UK markets, but we also are a pivotal part of the Eurozone, a huge market that is incredibly open to ambitious Irish companies.
Anne Lanigan, Regional Director, Eurozone, at Enterprise Ireland believes that the Eurozone represents a huge opportunity for Irish companies, particularly at this time of recovery.
“The market in the Eurozone is five times that of the UK, yet, Irish industry exports from Enterprise Ireland supported companies are just 80% of what they are to the UK. That highlights the opportunity in Europe – we have really only just scratched the surface. It’s a huge market and it’s an easy market in terms of the lack of infrastructure barriers.” says Lanigan
“In general, Europe is very open to working with Irish companies, not just because we’re Irish but also because we’re innovative, we’re very flexible and friendly to work with, and we are very good at customising our product to suit the customer – and that is very much valued in Europe. We’re pushing an open door in Europe. The challenge is in our own mindset.”
Fewer overheads, more profit
But the most attractive part of trading in the Eurozone is the fact that we are operating in the same currency. Investment and financial advisor John Power says that the positives of the single currency cannot be underestimated for SMEs. “When you bring it down to brass tacks, for SMEs, anything that requires intervention, eg if you have to manage currency, is an overhead. I think that some smaller companies often forget that managing a currency is an overhead, and removing an overhead is always going to have an immediate effect on your profits.”
Language is often cited as a barrier to Irish companies trading in Europe, but the positives of dealing in the single currency override any such barriers. “Language is a barrier but we think that habit might play a part too,” says Anne. “Irish companies know how to deal with currency as we have traded with the UK and with the US for years, but even if you have the capability to deal with currency, it is still an overhead. It’s a good thing that our companies are able to deal with currency issues, as the UK, the US and other countries are very important markets for us, but Europe does offer a market that removes this overhead, so your profitability is higher when you’re dealing in the same currency as your customers and your suppliers.”
There is a second reason why the single currency is invaluable for Irish SMEs – the volatility of exchange rates. “When Brexit was voted upon, we saw the volatility of sterling and the damage that it did to Irish companies,” explains John. “We saw massive margin erosion and margin uncertainty. We saw that margin uncertainty happened throughout the sales cycle, so the margin that a company thought they would get at the start of the sales cycle could be completely eroded by the end of it. It was then that we saw the real damage that currency volatility can do.
“When you’re an SME working in international markets, the more risk you can eliminate, the better. One of those risks is currency and as an asset class, it’s probably the most volatile. If you can eliminate that, it has to be a huge positive because you’re eliminating a huge overhead and a risk at the same time.” explains Power
Lack of barriers
But there are plenty of other advantages to trading within the Eurozone. For one thing, the lack of barriers in the European Single Market means that trading is quick and straightforward. “Mainland Europe operates much like the States in terms of there’s no real land borders to trade between member countries,” says John. “Our traditional trading relationship with the UK and the US may have resulted in us partly ignoring the opportunities in the Eurozone, yet it’s possibly the nearest and the easiest trading relationship we have.
“We are the only English-speaking nation in the EU, we have a great position on the edge of Europe and we share the single currency. This puts us at a unique trading advantage right now.”
And, financial transactions are fast and easier too, John explains. “We are also members of SEPA, the Single Euro Payments Area, which significantly reduces transaction costs and the time it takes to make a payment. Along with the single currency, this make it far easier for small companies to forecast revenue, and to receive and make payments.”
All these financial factors have the potential to transform profitability for Irish SMEs, at a time when revenues and profits are in danger of being squeezed. Luckily for us too, Europe welcomes products and solutions from Irish companies, and we have a great reputation in the most in-demand sectors right now.
“We have companies excelling across a wide range of sectors,” says Anne. “The most important right now would be high-tech construction, ICT – which fits into every sector – agritech & agriculture engineering, automotive and life sciences. But broadly speaking, we have companies providing solutions for every sector in Europe.”
Put simply, the Eurozone is a huge market full of opportunity for Ireland – and a market that actively welcoming Irish companies. Time, then, to think European.
Enterprise Ireland and the Institute of International and European Affairs (IIEA) presented at three part series; Europe is our future. Watch the final webinar from Sept 24th below: