Guinness Exports Subject to Brexit Uncertainty

Guinness Exports Subject to Brexit Uncertainty

By Shoshanna Delventhal | April 8, 2017 — 11:09 PM EDT

Diageo Plc’s (DEO) iconic Guinness beer could face problems as the Dublin-based brewer foresees potential border compilations between the United Kingdom and Ireland, a European Union member state.

The 310-mile border between The Republic of Ireland and Northern Ireland will serve as the only land border between the U.K. and another EU country. Barrels of Guinness cross this border twice before being shipped out to beer connoisseurs around the world.

Companies Fear Return of Hard Border

Ingredients for Guinness are shipped from across Ireland to Dublin where they are mixed and fermented at the brand’s famous brewery at St. James Gate. The stout is then transferred into tanker trucks and moved 90 miles north to a Diageo packaging facility across the border in East Belfast. The Guinness, ready to hit the markets, then passes the unmarked border a second time before returning back home to Dublin.

Over the past two decades, an open border has allowed for the overall peaceful exchange of trade and culture between the U.K. and Ireland. While E.U. and British politicians say border controls between the states won’t return, many wonder how realistic that is. “For me, there’s no question, there has to be some sort of customs visibility on either side of the border,” Bloomberg quoted Robert Murphy, a former European Commission worker in Brussels.

Restraint of Trade?

The Irish government estimates cross-border trade between the U.K. and Ireland surpasses an annual 3 billion euros, or about $3.2 billion. A hard border could cost corporations big time, as the two states have a highly integrated agri-food sector. Diageo, for example, is estimated to lose 100 euros on each beer journey from Ireland just due to a time delay, amounting to 1.3 million euros in additional cost per year given border controls revamp.

The Economic & Social Research Institute estimated Brexit​ could cut trade flows between Ireland and the U.K. by 20%. Diageo for one, has said it will work with the the two governments on finding a solution to the border issue. E.U. leaders are scheduled to meet later this month for a summit to begin what is estimated to become two years of Brexit negotiations. (See also: Diageo: Finally Benefiting From ‘Transition Year’?)
Published at Sun, 09 Apr 2017 03:09:00 +0000

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