Despite the challenges of Covid-19 and Brexit, 82% of businesses in the Irish food, drink and horticulture sector are optimistic about the future, according to a new report by Bord Bia.

The results of the 'readiness radar' report are based on a survey of 111 Irish businesses, representing an estimated 60% of the all Irish food and drink exports.

The survey reveals that the trading environment with the UK and the implications of Brexit remain an issue.

45% of businesses surveyed said they have seen the value of their exports decline since the referendum in 2016.

90% of the Irish businesses exporting to Britain reported an increase in the costs of doing so post-Brexit.

For 80% of these, the survey reveals that margins have been reduced which has led to price increases for British customers, therefore impacting adversely on competitiveness.

To help offset some of the impact of Brexit, the businesses surveyed said they remain focussed on the need to diversify into new export markets.

The EU was identified as the most significant prospect in terms of market diversification, with bright expectations for Asian markets in particular from larger enterprises and those in the meat, dairy, and seafood sectors.

Figures show that 46%, (or €871 million) of total export growth since 2016 (€1.9 billion) comes from the EU27, while international markets accounted for 43% (or €817 million).

Bord Bia's Chief Executive Tara McCarthy

Bord Bia's Chief Executive Tara McCarthy said the food and drink industry has "bravely confronted" Covid-19 and Brexit disruption.

However she said the adverse effects of Brexit on margins and costs signal the significant challenges still facing the sector.

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"This year’s 'readiness radar' provides us with excellent up to date insight into the biggest risks facing the industry and will allow us to continue to tailor our supports for the sector to help maintain and grow food exports now and into the future," she said.

Minister of State at the Department of Agriculture Food and the Marine, Martin Heydon said despite many challenges, the sector remains resilient.

"The industry’s confidence is reflected in the desire to diversify and expand to new markets, signalling global ambitions for growth.

"This ambition for market diversification is crucial to mitigate the impacts of Brexit, and to take full advantage of the opportunities in the rest of the EU and in international markets such as Asia," he said.

The survey reveals that sustainability is the most significant challenge facing the global food and drink industry.

Eight in ten companies surveyed consider sustainability spend to be an investment as opposed to a cost, while three in four have verified sustainability measures in place.

When looking at what is driving the sustainability agenda, social responsibility, customer demands and consumer expectations were called out as the top three forces of change.

Packaging, responsible sourcing and waste are the current top sustainability priorities for companies, and the sector almost unanimously agrees (95%) that sustainability will become more important in the next three years.

Meanwhile, attracting, developing and retaining talent emerges as a 'top five' risk area in the report.

73% of businesses consider it to be a risk to future development and growth, with 38% citing it as a critical or very significant risk.