“Extreme frustration” has been expressed by Dairy Industry Ireland (DII) on the lack of an Irish export credit insurance scheme from the government.
Despite the industry demonstrating considerable resilience navigating the overlapping of the Covid-19 and dairy processing peak, the Irish agri food sector does not have a state-backed trade credit scheme, DII noted.
Ireland remains the only main exporting country in Europe, including Northern Ireland, without one.
Commenting on the matter, DII director Conor Mulvihill said:
When you consider that the Irish dairy industry exports well over 90% of its produce, it means that the industry here and the farmers that supply it are at a clear competitive disadvantage to other countries that put this in place as soon as EU legislation allowed.
“We now have the ridiculous situation that businesses operating in Co. Down can access a scheme and a company operating in Cavan cannot. Export credit insurance is an important tool for all exporting sectors.”
DII first requested that the government move on a scheme in March 24, when the EU relaxed the state aid rules, Mulvihill noted.
Continuing, he said: “Subsequent to that we engaged EY, which did a deep dive economic report on Covid-19 and Irish dairy – and the provision of an export credit insurance scheme was a key recommendation of the report in early April.
“DII companies then worked with both the departments of agriculture and business to provide extensive further information to give data to back the case.
Almost five months later we still have yet to see a scheme emerge, despite all of our competitor countries having a scheme in operation.
The director highlighted that trade credit insurance providers themselves informed the Irish government in mid-April that they would be reducing trade credit supports for Irish companies because of Covid-19.
“At the end of the day if the exporting companies are being put at a disadvantage, farmer suppliers and rural communities from across the country will lose out,” Mulvihill warned.
“This is not to mention that Ireland’s agri sector is faced with the additional hit of a possible no-deal Brexit in the coming months.
“DII is asking the government to act on the extensive evidence given to the relevant departments and announce a scheme as a matter of urgency,” the director concluded.
What is export credit insurance?
Trade credit insurance covers the risk of a business not getting paid by a customer that it sells a product or service to.
It is particularly important for sales of high-volume and high-value products where exporters can be exposed to huge sums of money with individual customers.
The overall credit insurance market in Ireland is €15 billion, underpinning support for €50 billion in trade.
The UK government put in place a state-backed trade credit scheme which will support transactions of up to €10 billion by UK and Northern Ireland companies, backdated to Wednesday, April 1. Similar schemes were announced in various EU countries since the lifting of EU state aid restrictions in March.
In the absence of a state-backed scheme and with the credit insurers implementing cuts, Irish exporters will come under particular pressure in an already difficult market, DII warns, adding:
By not having access to a state-based scheme, Irish companies will be forced to operate with less working capital or make special deals with customers for immediate or advanced payment, both of which reduces the price that an exporter can negotiate.
Non-credit insured transactions require increased borrowings in a demand-reduced economy, as companies cannot avail of credit from suppliers.