I want to raise the issue of Brexit and, in particular, the effect it is having on the mushroom industry in Monaghan and elsewhere. The mushroom industry provides a stark warning to the rest of the country’s economy about Brexit and the damage a sustained weakness in sterling can inflict. It really is the canary in the coalmine for the Irish agribusiness.
Ireland’s mushroom industry, the fifth largest in the European Union, has an annual production worth €120 million and employs 3,000 people throughout rural Ireland. One in every two mushrooms sold in the UK is Irish, while 43% of production costs are labour costs. Our mushroom growers rely on the UK for approximately 80% of their sales.
However, they have been losing money since the referendum sent sterling into a downfall. Several mushroom farmers have already gone out of business with the loss of 130 jobs, most of them in rural Ireland. A further six mushroom farms are under serious pressure with the potential loss of a further 300 jobs, again all located in rural Ireland. The potential impact of further closures is enormous, especially when one considers many of these jobs are heavily concentrated in counties such as Cavan and Monaghan.
Producers pinned their hopes on the Government’s so-called Brexit-proof budget. They have now joined other business groups in criticising it as totally inadequate. They say they are not looking to be propped up indefinitely, but that they certainly need some help in the short term. Contracts were entered into when sterling was strong. Now they just need to get into next year when these contracts will be up for renewal again.
The mushroom industry made a detailed presentation to the Joint Committee on Agriculture, Food, and the Marine in advance of the budget, which I attended. The industry pinned its hopes on measures being introduced which would alleviate its difficulties. The committee made recommendations along those lines but, unfortunately, none of which was implemented. Mushroom farmers have called for a cut in the level of social insurance tax levied on employers and the provision of emergency funds to exporters. Instead, they were offered cheaper loans and small tax relief measures.
It is a concern that exporters who shift 44% of their product to Britain are reporting they are starting to encounter some issues in accessing credit from banks concerned about their currency exposure. Some firms with a high proportion of sales in Britain are also considering shifting their production there with obvious implications for jobs on this island. The Minister for Finance, Deputy Michael Noonan, suggested the budget measures would likely not be the last to cushion the impact of Brexit. He spoke about the need to wait until he sees the shape of Britain’s exit negotiations next year. This will be cold comfort if exporters have already closed down.
The lack of breathing space in the budget is in fact, likely to speed up the increased mass closures. Options from the industry have been suggested, including the provision of more funding for firms breaking into new markets, a partial State guarantee of their credit exposure to suppliers, as is available in other countries, and the reactivation of a fund set up in 2008 that offered up to €500,000 to viable firms facing exceptional difficulties.
Brexit is the greatest economic challenge facing Ireland in this generation. The outcome of the US elections adds to this volatility. The Government, so far, has shown a lack of interest in issues affecting Border areas. A serious change of direction is now needed to confront the problems we face arising from Brexit. Our retail sector is also suffering, underlying no country is more affected than Ireland, and no part of Ireland is more affected than the Border counties, as a result of Brexit.
Some people believe Brexit will not happen until Article 50 is triggered. If one lives in the Border counties, one knows Brexit is here now. Without action, thousands of jobs will be at risk.
Andrew Doyle (Wicklow, Fine Gael)
I reassure Senator Gallagher that I am acutely aware of the challenges the mushroom sector is experiencing in the aftermath of the UK referendum decision to exit the EU, particularly in light of recent fluctuations in currency. I am focused on working with the industry to meet these difficulties in the months and years ahead.
The impact that the devaluation of sterling is having on mushroom producers and growers is a problem that has happened over a very short space of time. Grower production of this highly perishable product must be well aligned with demand and the mushroom sector, like many other exporting sectors, is particularly at risk because of the high dependency on the UK market.
I am monitoring sterling fluctuations closely and my Department has established a dedicated unit considering the impact of Brexit. Additionally, Bord Bia is working closely with the sector on market intelligence, UK consumer research and quality-assurance measures. It recently held a currency and negotiation workshop, specifically targeted at the sector, which I understand was very well received by the mushroom industry. In the coming weeks, the chief executive officer of Bord Bia and the Minister, Deputy Creed, will continue to meet senior executives from the UK retailers to highlight the obstacles that producers are facing. Bord Bia is also running a marketing intensification programme, which aims to provide targeted marketing supports to companies with a high dependency on UK markets. Grant supports will be prioritised to assist companies in strengthening their position in that market and in their efforts to identify new markets.
As announced in last month’s budget, an extra €700,000 has been secured for capital investments in the commercial horticulture sector. This will increase the budget for this scheme to €5 million in 2017. Additionally, the horticulture sector will have access to the €150 million low-interest cashflow-support loan fund announced in the budget, providing access to highly flexible loans for up to six years for amounts up to €150,000 at an interest rate of 2.95% with an option to pay interest only over the first three years. There have been significant expressions of interest from people in the mushroom sector in that product.
I also draw attention to the ongoing support being provided to the industry through national and EU schemes. Under the National Development Plan 2007-2013, my Department implemented the scheme of investment aid for the development of the commercial horticulture sector. During this period, my Department paid over €4 million in grant payments to mushroom growers, supporting €10.1 million in investment.
To ensure ongoing support for the sector, the Department extended, under EU sanction, the scheme of investment aid for the development of the commercial horticulture sector to run until the end of 2019. In 2014 and 2015 a total of €1.635 million in grant aid was paid to mushroom growers. The grant aid paid supported some €4.1 million in investment by these growers. Under the 2016 scheme of investment aid, my Department issued approvals amounting to €1.33 million in aid to growers in the mushroom sector, supporting €3.3 million in proposed investment.
The EU producer organisation scheme is also vital for mushroom growers, with 65% of Irish growers in a producer organisation at present. This scheme provides an important mechanism for growers to achieve greater bargaining power in the marketplace by becoming part of a larger supply base. In the ten years from 2005 to 2015, a total of €39.8 million was paid to mushroom producer organisations as part of the scheme. Recently, my Department delivered a payment of just under €1.57 million to one of the mushroom producer organisations.
I fully recognise the challenges for food exporters to the UK market arising from the fall in sterling and my Department and its agencies will continue to work positively with the industry during this challenging time.We are always trying to figure out new ways to help people. The mushroom sector is in the eye of the storm, being the most exposed to the short-term ramifications of what has happened with sterling. We are not neglecting the Border area or any rural area in that regard.
Robbie Gallagher (Fianna Fail)
I thank the Minister of State for his comments and I am heartened by his sincerity in trying to find solutions to this acute problem. The industry is one in which we have achieved worldwide recognition. We are a world beater in the production of mushrooms. The aid scheme we are seeking would be a temporary measure to get people over the hump. The €1.5 million in EU funding through the banks the Minister of State mentioned is welcome. My understanding is the banking sector is tightening up, as many businesses are aware. Sterling has also weakened. Businesses’ credit providers are gauging the survivability of the mushroom industry and we are looking for a more immediate jolt. Employer’s PRSI was mentioned. Perhaps payments might be frozen for a six-month period to get people out of this problem. As I said, I am heartened by the Minister of State’s comments and hope some immediate measures will be put in place in order that jobs which are hard to come by because they are to be found in rural Ireland, as I am sure the Minister of State is aware, can be sustained.
Andrew Doyle(Wicklow, Fine Gael)
This industry is worth fighting for. There is no question about the quality and seamless service customers in the United Kingdom are getting. That is one of the messages the Minister and the CEO of Bord Bia will be impressing on retailers.
I will address a point that is not directly related to my Department. We have engaged with major players in the industry who have asked that we set up a new Lean programme to improve harvesting techniques. According to my note, a pilot programme on Lean processes that is being implemented by Bord Bia with financial assistance from Enterprise Ireland is commencing with mushroom growers to assess the level of efficiency across all aspects of the business, including the supply chain, innovation, marketing and logistics. While it crosses over from the Department into the Department of Jobs, Enterprise and Innovation, it is an important add-on to other efforts that are meant to assist the industry.
Source: KildareStreet – Horticulture in the Dail – Brexit Issues for Mushroom Industry
