Karl McHugh leads me up stairways and corridors running parallel to a pallet elevator and conveyor, then through two thick insulation doors. Each time, the temperature drops dramatically as this division of McHugh’s business, Arctic Fish Processing, lives up to its name.

I’m tempted to compare the frozen storage hall we end up in to a cathedral, but it’s bigger than that. The brand new warehouse has capacity for 16,000 pallets. A robotic trolley system, designed to withstand the polar temperature, can fetch any of them on demand. 

The first batches of fish caught and processed by Atlantic Dawn, the wider group owned by chief executive McHugh and his family, landed here in the spring. He explains that the frozen storage capacity will allow the business to hold on to stocks beyond the October to April catching season, rather than having to dump it on the market when supply is plentiful and prices are low.

This is part of a €100 million investment plan Atlantic Dawn launched a year and a half ago to overhaul the processing plant in Killybegs, Co Donegal and its fleet of fishing vessels. 

Downstairs, construction workers are putting the finishing touches to a processing hall extension recently fitted with computer-controlled equipment brought in from Norway. McHugh details the process through which freshly caught fish is sorted, packaged and frozen into 20kg cartons. There is a small production line for fillets or headed and gutted fish, but he says Atlantic Dawn is mostly a “catch and batch” business, with sales all around the world. “Siberia has a particular way they like to smoke their fish, Japan likes a particular cut. There is no need for us to try to do it better than their cottage industries.”

This model has made Atlantic Dawn a business success, and McHugh and his family multi-millionaires. Yet, he warns that this is now under an “existential threat” that can be summed up in one word: Brexit. “Everything is here. All we need is the fish,” he says. But the reallocation of fishing rights under the Trade and Cooperation Agreement (TCA) between the EU and the UK has been particularly unfair to Ireland, he argues. “That’s given away. That’s not right.” 

Over the course of a detailed interview and tour of Atlantic Dawn’s operations in Killybegs, McHugh makes the case for his business and for the wider Irish fishing industry in the face of the new Brexit state of play and the environmental criticism targeting large-scale fishing operations. 

*****

McHugh says Atlantic Dawn’s business “is based first and foremost on fishing, catching with our catching vessels, but also on processing and the international marketing of our frozen fish”. The group has operations in Ireland, Norway and West Africa and trades all over the world. “The heart of the business, from the very beginning, was on the catching side, and that remains the cornerstone of the business,” he insists. “We have a foundation of quota that is our mainstay in terms of supply, but we do procure fish from other catching vessels as well.”

In Norway, Atlantic Dawn has no fishing rights and processes fish caught by others. In the Nordic country, the group also owns a separate fleet of four ships equipped for the seismic exploration of oil and gas, including one of its former fishing vessels. They are operated by a specialist Norwegian partner company, McHugh says. 

Of Atlantic Dawn’s 220 employees, half are based in Killybegs. The seasonal nature of the business, with most activity occurring in the winter, means that many complement other part-time activities in Donegal such as farming, he adds.

The founder of Atlantic Dawn was McHugh’s father, Kevin, who started fishing commercially in his native Co Mayo in 1968. “There was a natural progression where my father, who was very much a pioneer of the industry, was an early adopter in terms of targeting pelagic species, which are best defined as abundant, shoaling fish that are high in volume and relatively low in value – the main species being mackerel, but there’s also herring and sardine, for example,” McHugh says.

Pelagic species live near the ocean’s surface, in opposition to so-called demersal bottom-feeders, which include many species of high-value whitefish. Their quotas are regulated separately, and the pelagic business took off in the 1970s.

McHugh says his father first grew the family business around this catch. “But that led him, then, to get involved in processing. Because it’s a regulated industry, and catching opportunities were limited in both Ireland and Europe, it led them to look to other jurisdictions, and we set up a business then in Norway and in West Africa.”

The African fishery came first in 1999, followed by Norwegian operations in 2003. Today, McHugh says that Ireland represents 60 to 65 per cent of Atlantic Dawn’s business, West Africa around 25 per cent and Norway 10 per cent.

On October 31, 2006, 60-year-old Kevin McHugh unexpectedly died of a rare illness. It was time for his son Karl, then 33, to take over. He was already a director of Atlantic Dawn for three years and had been steeped in the family business for much longer.

“When you’re part of a family like I grew up in, then you become absorbed in the business. It’s what you talk about around the dinner table and the breakfast table,” he says. Karl and his brother Kevin jr had both been out to sea with their father, who assigned them roles in the business from a young age.

“I think my father, in his wisdom, saw the importance of having a family member that would focus on the sea side of the operation in terms of my brother being a captain, and now remaining a captain, of one of our vessels and a director of fishing operations here in the company; and then from a pretty early stage, my trajectory was to go to college, to get my degree and go on to do my MBA and to look after the business side or the shore side of the operation.”

Yet McHugh remarks that he and his brother had to show interest and commitment before they were given significant responsibility. His two other siblings, Paul and Noreen, chose not to get directly involved in the business – though they are shareholders.

“We were fortunate, then, to have over 10 years of work experience with the best mentor you could possibly have in the business. In one sense, you would say that he had been very well prepared, from the point of view of recognising the importance of filling the roles that we are now fulfilling. Given how sudden and unexpected his passing was, certainly we would have preferred, obviously, to have him here with us to this day, but unfortunately, that wasn’t the case.”

While Karl McHugh won’t say a bad word about the way his father ran the business, there has been an evident strategic shift since he took over. Within months of Karl taking the helm, the gigantic Atlantic Dawn supertrawler was sold after just seven years in operation. He cites a good offer received at the time as the reason for the divestment. The family also exited other local interests, such as the Bay View Hotel in Killybegs.

Before embarking on the current investment programme, McHugh parted ways with Niall O’Gorman, a fellow top executive and director brought in by his father two decades earlier. Before O’Gorman sold out in 2018, he owned 17.6 per cent of the Atlantic Dawn group – the only shareholding held outside the family at the time.

The second generation of McHughs has focused on a more “nimble” strategy. And where their father was all about growth, Karl emphasises sustainability.

TH: You’ve mentioned a few times since we started, the word sustainability, which is everywhere. First of all, I wanted to hear what that means for you as a business owner in the fishing industry.

KMcH: This is something that I feel very strongly about. I’ve talked about the resource and how powerful a proposition it is. It’s a healthy, nutritious source of protein that’s carbon-friendly. We’re very passionate about that. But it has to be protected and we have to be mindful.

Fishing companies simply cannot be agnostic to climate change. If we don’t protect the biodiversity of the oceans that we’re operating in, then we won’t have a future. We’re like custodians of this fishing right. It needs companies like ours that have the skills and knowledge and expertise in order to monetise it, but we have to be respectful of it. We have to take care of it and nurture it and make sure it’s there for future generations.

Throughout my business, we have looked to implement sustainability, whether it be in environmentally-friendly freezing systems, most particularly with the new generation of fishing vessels that we have under construction. Those fishing vessels will be the first of their kind in Ireland to have hybrid propulsion systems and features in them like the capacity to have zero-emissions harbour entry. They can have what’s known as peak shaving, where they are highly efficient in terms of how they propel themselves through the water. We have a funnel filtration system that reduces the emissions of nitrogen oxides by up to 80 per cent.

All of these measures are not regulated upon us but we feel that we have an obligation, that it’s incumbent upon us to try to give back a little bit in terms of what we’re taking from the ocean. The way we view our fisheries and our operation is we only take what nature gives us and we leave behind what nature needs. That’s a guiding principle for us.

“It can be easy to use the image of a large vessel and to try to basically misrepresent that as being harmful without having the full knowledge and facts to base it on.”

TH: There’s been, over the years, a lot of criticism of large trawlers for the way they fish – just the fact that they catch a large amount of fish at the same time, some of them might be bycatch, there is damage to the ocean floor. What do you say to these types of criticism?

KMcH: I will quite happily debate that issue with anybody because I think the difficulty is that our industry is often misunderstood. It can be easy to use the image of a large vessel and to try to basically misrepresent that as being harmful without having the full knowledge and facts to base it on. We are a highly regulated industry and the cornerstone of that regulation is sound scientific research, which dictates not only the areas and quantity that we can catch but also closed areas, special areas of marine reserve, minimum mesh sizes, closed seasons, the minimum size of fish. We’re satellite-tracked. 

All of these measures are there to ensure that companies that perhaps aren’t as mindful as ourselves cannot get away with the type of criticisms that NGOs and others would wage upon us. And some of the time, with respect, I think that there is an element of idealism in terms of the fact that, again, they don’t fully understand or appreciate our business and they would prefer to see no commercial fisheries.

But the reality is that over 70 per cent of this globe is ocean. All the protein we’re taking out, the vast majority of it is on the land. It’s not logical that we have 70 per cent of the globe that has an abundance of protein and for NGOs to be saying, actually, you shouldn’t be doing that. It’s quite the contrary. This is something that is good for our environment.

We’re going to have 9 billion people by 2050 on this planet, and they’re all going to need extra sources of food. From my point of view, the oceans, if they can continue to be managed in a sustainable manner, will be able to solve a lot of that problem – if you look to our fishery and you think it’s a zero-input source of protein, there’s no freshwater needed, there’s no feedstuffs needed for that. Mother Nature is looking after all of that. There’s no pesticides, there’s no fertilisers. The only preservative that we use is a natural, environmentally-friendly freezing process.

This is a tremendous resource, and I think it’s definitely something that’s misunderstood. Especially with our type of fishing that’s mid-water trawling, we’re not touching the seabed, we’re not interacting with important coral regions. These are abundant shoaling masses that are highly targeted in terms of us being able to identify exactly fish species before we shoot our nets.

TH: Whether I cover farming or, now, fishing with you, the discourse around food production and the environment, I feel, is more and more divisive and divided. As you’ve mentioned yourself, there are NGOs on one side and industry on the other side. Do you see any areas for common ground, for a more cohesive approach and people who care about both aspects to try and work together?

KMcH: I think, ultimately, consumer demand is going to force companies that are not proactive like ourselves into a space where they have to be more focused on the environmental credentials and the manner in which they’re running their business. But as I said already to you, I’m quite comfortable in terms of my ability to defend our operations and the type of sustainability measures and environmentally friendly measures that we have implemented.

*****

Today, McHugh is a director of 17 Irish companies forming part of the Atlantic Dawn group, along with its Norwegian subsidiary. The privately-held, unlimited family structure does not publish accounts, but neither does it use the offshore tax arrangements often seen in the ownership of similar businesses elsewhere in Ireland. 

The last time Atlantic Dawn filed a financial statement was in 2003 when it had €38 million in fast-growing revenue and its pre-tax profit had just jumped from €9 million to €26 million thanks to an unspecified once-off “operating income”. The family shareholders were sitting on nearly €60 million in accumulated profits. These figures now look vastly out of date. 

The only indication I get of the group’s financial performance is its modern, functional offices, its state-of-the-art processing plant, and McHugh’s own car, a 201-registered Porsche Cayenne – the e-hybrid model, just like his new trawlers.

This does not stop me from asking, however, and our discussion on how money is made from fish leads us to the Brexit threat. 

TH: As a privately-owned business, I know you choose not to publish detailed accounts, but can you give us an idea, financially, how it works, and how performing it is?

KMcH: The best thing I can tell you on that is that the difference in our business is based on the fishing opportunities we have, and they are changing every year with scientific advice. So obviously, as I said, we have a highly regulated industry and quotas can shift quite considerably year on year. What has happened recently has been, really, what I would say is an existential threat to us, where we’ve had a huge shift in terms of our fishing opportunities as a result of the quota cuts that were brought about by the TCA  and the outcome of Brexit. I think that is really, from a financial point of view, where the difference in our business from one year to another in terms of profitability comes into the equation.

“If you’re producing widgets and they’re selling well, you’ll simply produce more widgets and you keep selling them, but we can’t do that in our business.”

TH: Can you explain to the uninitiated – the TCA, quotas, how does that work? And what is changing now?

KMcH: It’s sometimes difficult for us to appreciate because we’re absorbed in it every day, but it is a highly complex regulatory environment that we operate in. It can be difficult for the layperson to fully appreciate the implications that can have on our business. 

In most business models, if you’re producing widgets and they’re selling well, you’ll simply produce more widgets and you keep selling them, but we can’t do that in our business. The cornerstone of how quotas are set is based on the sound scientific research that is produced. We have basically subscribed from the beginning to the notion that if we don’t have a sustainable fishery, then we don’t have a business for the future. And we’ve always respected the rules that govern sustainability.

That means that the scientific advice that forms the instruction in terms of what quotas are offered each year is paramount in terms of fishing opportunities. From one year to the next, it can be, in recent years, 10, 15, 20, 30 per cent depending on the species, and that can have quite a big impact on us.

TH: Are you talking about those kinds of 10 to 30 per cent swings only downwards, or can it go back up the next year? 

KMcH: No, it can go back up. Because the normal laws of economics kick in, we have found, certainly in more recent years, that if there is a reduction in quota and fishing opportunities, it can, to some extent, be compensated by price. But unfortunately, when we find a situation where we’ve lost fishing opportunity to Brexit, then the same amount of fish has been caught, it’s just been caught by other companies in other jurisdictions. 

That’s where we have a huge difficulty at the moment. The outcome of Brexit makes it a hugely different proposition when we have lost fishing opportunities and there’s no market advantage to cushion that blow.

TH: Concretely, what does Brexit mean for Atlantic Dawn? What was agreed and how does it impact on you more specifically?

KMcH: Our most important species by both volume and value is mackerel, and that was reduced by 26 per cent. So that is a huge hit for us, and something that we are very disappointed by. To this day, we haven’t been given an explanation in terms of the logic that was applied to the species selected and the quantums of those species and the jurisdiction that they were taken from. 

What is clear to us is that Ireland suffered a disproportionate cut relative to other EU countries. What we’ve been focused on since this news broke on Christmas Eve last year is trying to lobby our government to look to see if we can have a burden-share arrangement with the EU. Everybody acknowledges and accepts that what was lost to the UK is gone. Nobody wants to hear the word Brexit again, nobody wants to open up that negotiation again. But what was, from our point of view, totally unacceptable was that Ireland be treated in a manner that was disproportionate relative to others.

The whole principle of the common fisheries policy is that we have our share of quotas and that everybody rises with the tide and falls with the tide together. But that logic seems to have gone out the window with what was doled out as a result of the TCA.

A “Rule Britannia” issue

McHugh has his own view of what went wrong for Ireland in the final hours of the Brexit deal. “We were assured that in Brexit negotiations, fishing would be part of the main trade agreement. But Boris Johnson and Nigel Farage made it an emotional, ‘Rule Britannia’ issue,” he says.

The prospect of a bad deal for Scottish fishermen, in particular, was a red line for the British government as Scotland began to agitate for independence again. As Brexit talks went down to the wire between EU and UK leaders, fish was one of the final bargaining chips. “But Boris Johnson and Ursula von der Leyen don’t know much about fish. They came to a number and, to make up that number, our species were the low-hanging fruit,” McHugh says.

The number was the transfer of €200 million worth of annual quota, based on 2020 prices, from the EU to the UK by 2026. The low-hanging fruit, taking the largest hit of any fishery in Europe, was Ireland’s mackerel quota.

The burden-sharing mechanism McHugh is calling for would mean that Ireland, after transferring this resource to the UK, would in turn reclaim access to more of the mackerel quota available within Irish waters – at the expense of other EU fishing fleets.

“If we go right back to the 1980s, when quotas and quota shares were being established after Ireland’s accession into the EU, the compromise we made in entering the EU – one of the big ones we made – was giving away our fishing rights to other EU nations,” he says. “What we’re looking for is a rebalancing, so that we can try to get back closer to the level we were at by having more of the fish in our own waters.”

For all the flexibility and far-flung operations Atlantic Dawn has developed outside the EU, McHugh says the lost fishing opportunity under current Brexit arrangements is very difficult to replace for the company and for Ireland’s industry as a whole. He sits on a task force set up by the government to mitigate the impact of these changes. He says his only message there has been to urge a negotiation on burden sharing, even though he acknowledges that this will be “a difficult discussion, when, essentially, you’re saying to other EU nations, we want something back from you guys”.

“But the whole guiding principle of the common fisheries policy should be that we rise and fall with the tide together,” he adds. “I feel that, based on these compelling arguments, we should be able to prevail and it’s very difficult for them to deny it, but it will need our government to put their full weight behind it.”

McHugh is a finalist in the 2021 EY Entrepreneur of the Year competition and he firmly intends to use this platform to lobby for this. “I don’t necessarily have any expectations in terms of winning the competition,” he says. “I had said from the outset to the people in Ernst and Young that I would hope that it will help to shine a light on our industry and that any opportunity, such as this one today, that I do have, I will be emphasising the importance of this tremendous resource that we have in our coast and how crucial it is for our government to try to protect our fishing rights.”

The Brexit fiasco has led fishermen to protest on two occasions in Cork and Dublin in the past two months. McHugh throws his weight behind the “measured and respectful” actions. “I don’t view it as necessarily being a criticism of our government. I think it’s in support of our government to really amplify the message and to have that message resonate around the corridors in Brussels. I was fully supportive of the protest from that perspective.”

In the wake of the quota cuts, some Irish fishermen recently told The Currency that they hoped for government payments to tie up their boats during a longer off-season as opportunities to go out fishing dwindle. McHugh refuses to contemplate this solution. 

“If you think about the quotas in our waters, this is a self-replenishing commodity. It’s a natural resource that is owned by every citizen of the state of this country. It has a value into perpetuity,” he says “I’m second generation in this particular business, but I’m the third generation of my family that’s been involved in fishing. It’s important to ensure that we don’t allow these fishing rights to slip through our fingers and not have them available, because it’s very difficult to recreate these jobs that are in these rural communities. And it’s not only the jobs but the unique cultural tapestry that’s in these parts of the country.”

As far as Atlantic Dawn is concerned, he’s not worried about going out of business. As we walk through the cavernous processing and storage units the group has just invested in, he says: “everything here is going to be used, but it could be from catching vessels from other countries. This means less margin than from our own.” 

He adds that all the engineering skills and jobs that went into fitting out the building around us and the new fleet under construction would be lost to Ireland when these types of investments cease. 

To get the full picture of what he means, I’m missing one piece of the puzzle. It’s time to head out to Killybegs harbour’s pier.

*****

The Genesis II is awaiting replacement, yet she shows no sign of being ready for retirement. Docked in Killybegs during the summer, the 53-metre trawler is undergoing maintenance.  From propulsion to refrigeration and electronic fish detection, “you have to hit the ground running to service all systems in the off-season,” says McHugh as we get on board.

From the deck to the engine room, everything on board is spotless. There isn’t even the faintest smell of fish. The captain’s position is surrounded by computer screens, keyboards and levers. To my consternation, there is no longer a steering wheel. McHugh explains that the vessel is currently set up to work in a pair with another trawler, with each pulling one end of the net.

The cabins and lounge for the 11 crew are just as comfortable, if not more, than on a passenger ferry, with plenty of wood panelling and leather chairs. This is important when they spend long periods at sea, but in the latest wave of Covid-19 in January, they were also forced to stay on board whenever the fleet returned to Killybegs to land its catch.

The Genesis II, which Atlantic Dawn bought second-hand from Norway, will soon be sold again – McHugh says there is an active international market with demand from as far as Russia. The group’s new fleet is being built as we speak, with hulls constructed in shipyards in Turkey, Poland or Latvia before being fitted out locally.

McHugh says the largest of its new fishing vessels will cost €22 million. Atlantic Dawn’s fleet replacement is financed by a Norwegian bank. I ask him to explain why he pulled the trigger on this gigantic project.

KMcH: We have focused our business model on making our catching vessels more nimble and more environmentally friendly, and catching to preserve by chilled refrigerated water systems on board for delivery for processing onshore. That’s a pivot away from where we had larger vessels that were operating with sea-freezing factories and cold storage facilities on sea. That’s the principal difference in the new generation of vessels that we have commissioned and that are under construction at the moment. 

This was a very detailed process and quite a bit of blue-sky thinking in terms of how we could really make these vessels exceptional from the point of view of their environmental credentials. So that really is an important aspect for us in terms of the design of the vessels.

TH: Are there special requests you’ve had for shipyards that are maybe firsts in catching vessels and wouldn’t have been seen before?

KMcH: Yes, these vessels will be the first in Ireland to have hybrid propulsion systems and, in fact, a very sophisticated electrical configuration that really optimises the amount of power being consumed on board. And this would have been a very detailed, technical process that we went through with our naval architects. We had a company in Norway that guided us through this process, and that involved technical specialists, mechanical specialists, refrigeration specialists. Some of what we did was following what our Norwegian counterparts were doing – and the Norwegian government has provided very generous subsidies and grant aid for those companies. We, unfortunately, couldn’t avail of those kinds of grants and subsidies but nevertheless, it didn’t deter us from doing what we felt was right when we were making this investment.

“We have no doubt that from a business point of view, we could sell those vessels and not be at a loss. Most likely, it would be at a profit… That would be a tremendous shame.”

TH: What does that leave as a fleet at the moment for Atlantic Dawn? What does it look like and what is coming down the tracks?

KMcH: We have commissioned and have under construction, in total, five new vessels, one of which was already delivered only recently that was completed by a local shipyard here in Killybegs, Mooney Boats, and the other four still under construction, one of which we hope to have delivery of before the end of the year, and then the remaining hopefully at some stage during next year. It will provide us with modern and very sophisticated vessels that will leave us in very good stead going forward.

If you look to the vessels that they’re replacing, across the five vessels being replaced they’re an average of 26 years old. If you look to any industrial company in Ireland, when they have plant and equipment that are 26 years old, then it’s a very important part of your business model to ensure that they’re upgraded and replaced in terms of that kind of time span. It will leave us in a very strong position in terms of the technical equipment we have available to us.

But the concern, obviously, is just how much fishing rights we’re going to be able to have in order to justify those vessels. The reality of it is that given the quality of specification of vessel that we have commissioned, and the standard of what we know will be produced, we have no doubt that from a business point of view, we could sell those vessels and not be at a loss. Most likely, it would be at a profit.

That’s a tremendous shame if we had a situation where Ireland, which has always been a flag-bearer in terms of being pioneers, number one in the development of this fishery, but then flag-bearers in terms of what we’ve done over the years to keep advancing the industry, then to have to start to downsize the industry. That would be a tremendous shame. This is really the basis for us, trying to compel our government to get that redress that we need from the TCA and to try to ensure that justice is served in Brussels.

TH: The replacement of a fleet like that, five new vessels with that type of technology, could you give us an idea of the investment you’re looking at?

KMcH: Between our new building programme for fishing vessels, and also the upgrade of shore-based facilities, we have invested in excess of €100 million. For us, it’s a story of courage in the face of adversity, because we do have this existential threat from the loss of fishing quota and fishing rights going forward. Obviously, it’s a concern, but we’re in this for the long term. 

This is us as a company saying that we have the energy and the conviction and the enthusiasm to keep going, but we can’t do it all on our own and we do need our government to try to fight our corner and to secure that tremendous resource that’s out there that rightfully is ours and, as I said, is an asset of every citizen of this country.

If you think to the song that there is apparently gold in the hills of Donegal, if there were gold in the hills of Donegal, we wouldn’t be having somebody from Europe or somebody from the UK steal it from under our nose. And it should be the very same when it comes to fishing rights, especially fishing rights that have a value into perpetuity.

Further reading

Fishing less, importing more: Ireland’s seafood industry in choppy Brexit waters