The latest research from InterTradeIreland takes an in-depth look at small firms participating in cross-border exporting. This research uses new micro datasets to really understand how Brexit will impact SMEs.
This means the evidence generated by the research has helped InterTradeIreland to better understand the potential impact of Britain’s exit from the European Union on firms across the island, especially those involved in cross-border trade.
Launching the report, IntertradeIreland’s Designated Officer and Director of Strategy and Policy, Aidan Gough says: “Overall the work suggests that the impacts of any changes in the cost of trading post-Brexit are liable to be felt most particularly by very small firms trading across the border. Firms large enough to already have expanded broadly into the EU market are more likely to have the resources and scale to continue exporting either in their current markets or by diversifying into alternative locations.”
The key findings from the report can be grouped under three broad themes reflecting the roles played by exporters, small firms and the cross-border aspect of trade:
Exporting firms including cross-border traders have better outcomes across a range of key indicators including turnover, employment and productivity. Expanding participation in exporting can therefore make an important contribution to the performance of the economy.
1 Micro and small firms play a significant role in cross-border trade. Support for their expanded export participation could help underpin economic growth. Evidence for this can be seen from the following patterns:
2 There is increasing probability of being an exporter as firm size increases. This is particularly the case for goods firms with services firms tending to be less export-intensive.
• The performance gap between exporters and non-exporters, combined with evidence that entry barriers are lower for beginning to export in the neighbouring market, suggests that cross-border trade can be an important stepping stone to broader export participation.
3 Cross-border trade has features closer to local trade than to international export activity, suggesting many firms treat the island as their local market and functional economy. A number of patterns in the data support this finding:
• Almost all exporting firms in Northern Ireland include Ireland as one of their destination markets. Over 80 per cent of small firms that export from Northern Ireland have all of their export sales in Ireland. In contrast, 6 per cent of Northern Irish firms sell into the British market only without having any export sales to Ireland or elsewhere.
• Modelling of the characteristics of destination markets for Northern Irish and Irish export flows, show that there is a very strong neighbouring market effect on the number of firms trading and on overall export sales. This shows that the neighbouring market is considerably more accessible than entering exporting more generally.
• Looking at how business patterns of exporting are determined across broader export markets, membership of the EU facilitates export participation for firms from both Ireland and Northern Ireland but has a positive impact on average export sales only for Irish firms. Increased participation by small firms may come about with some firms selling quite small amounts.