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Irish exporters feel chill from Brexit fall in sterling Irish exporters feel chill from Brexit fall in sterling
(about 3 hours later)
Business activity and jobs in Ireland are already under threat because of the fallout from Brexit, a key Dublin trade body has warned.Business activity and jobs in Ireland are already under threat because of the fallout from Brexit, a key Dublin trade body has warned.
The sharp fall in the pound against the euro is already making Irish exports to the UK, including meat and dairy products, 15% less competitive, said the Irish Business and Employers Confederation (Ibec).The sharp fall in the pound against the euro is already making Irish exports to the UK, including meat and dairy products, 15% less competitive, said the Irish Business and Employers Confederation (Ibec).
“The Brexit strain is manifest and intense. Without urgent action to address competitive pressures, hundreds of millions of euros worth of exports and thousands of jobs will be lost,” said Ibec’s director, Fergal O’Brien.“The Brexit strain is manifest and intense. Without urgent action to address competitive pressures, hundreds of millions of euros worth of exports and thousands of jobs will be lost,” said Ibec’s director, Fergal O’Brien.
He likened the currency crisis to that of 1992 when Britain left the EU’s Exchange Rate Mechanism.
Britain is Ireland’s largest export partner, while Ireland is Britain’s fifth biggest trading partner, with €1.5bn (£1.26bn) in transactions each week.Britain is Ireland’s largest export partner, while Ireland is Britain’s fifth biggest trading partner, with €1.5bn (£1.26bn) in transactions each week.
A survey of 450 companies, commissioned by Ibec, showed that their main concern is the sharp fall in sterling, with cheaper UK imports to Ireland cited as another threat to domestic trade.A survey of 450 companies, commissioned by Ibec, showed that their main concern is the sharp fall in sterling, with cheaper UK imports to Ireland cited as another threat to domestic trade.
“This is now a full-blown currency crisis,” said O’Brien. “For exporters, the speed of sterling’s decline is on a par with the 1992 currently crisis.” O’Brien said that “tight margins mean businesses feel that pain quite quickly” and many fear that things could get worse. “We’ve been here before with the crash in 2008 when there was almost parity between the currencies, exporters would have squeezed their businesses, cut costs, cut jobs, but there isn’t that flexibility any more,” he said.
His warning comes as Dublin stockbroker Goodbody downgraded its forecast for the Irish economy due to a “Brexit chill”. Its chief economist, Dermot O’Leary, said the possibility of Britain slipping into a recession will “take the gloss off a robust Irish economic performance”. He added that decisions by UK supermarket chains such as Morrisons to cut prices on more than 1,000 products would have a knock-on effect on food suppliers and there were fears among suppliers that big retailers would become more aggressive.
They may review their medium-term sourcing strategies and find suppliers outside the EU. For Irish beef suppliers, for instance, this could mean having to compete with lower prices of Argentina and Brazil.
His warning comes as Dublin stockbroker, Goodbody, downgraded its forecast for the Irish economy due to a “Brexit chill”. Its chief economist, Dermot O’Leary, said the possibility of Britain slipping into a recession will “take the gloss off a robust Irish economic performance”.
Ibec said that analysis of historical trade between UK and Ireland showed a 1% weakness in sterling results in a 0.7% drop in the value of Irish exports.Ibec said that analysis of historical trade between UK and Ireland showed a 1% weakness in sterling results in a 0.7% drop in the value of Irish exports.
If the pound fell to £0.90 against the euro, that would cost Ireland £700m in food exports, said Ibec, and threaten 7,500 jobs in that sector alone.If the pound fell to £0.90 against the euro, that would cost Ireland £700m in food exports, said Ibec, and threaten 7,500 jobs in that sector alone.
The Irish central bank last month cut its economic growth forecast for the next two years, saying Britain’s exit from the EU was likely to curtail investment, export and employment growth.The Irish central bank last month cut its economic growth forecast for the next two years, saying Britain’s exit from the EU was likely to curtail investment, export and employment growth.
The central bank said it believed the Irish economy, which is the fastest growing in Europe, would continue to grow but that Brexit would have a negative impact. The central bank said it believed the Irish economy, which is the fastest-growing in Europe, would continue to grow but that Brexit would have a negative impact.
It cut its projections for growth in 2016 from 5.1% to 4.9% GDP growth. It cut its projections for growth in 2016 from 5.1% to 4.9% GDP growth. It also slashed 0.6 of a percentage point off its 2017 growth forecast, down to 3.6%.
It also slashed 0.6 of a percentage point off its 2017 growth forecast, down to 3.6%.
In the firm’s latest report on the Irish economy, Goodbody reduced forecasts for domestic demand from 5% to 4.2% in 2016 and from 4.4% to 3.7% in 2017.In the firm’s latest report on the Irish economy, Goodbody reduced forecasts for domestic demand from 5% to 4.2% in 2016 and from 4.4% to 3.7% in 2017.
It said it was taking a more cautious view on net exports and business investment.It said it was taking a more cautious view on net exports and business investment.
However, it said Ireland was in a good position to shield itself from a potential recession in Britain as it continues to recover from the financial crash and ensuing 2010 bailout by the IMF.However, it said Ireland was in a good position to shield itself from a potential recession in Britain as it continues to recover from the financial crash and ensuing 2010 bailout by the IMF.
Asset values, including property, remain at pre-crash levels and there is continuing slack in the Irish labour market, whereas the UK’s unemployment rate is back down to pre-crisis levels. Household savings are at historic lows and asset prices are seen to be overvalued.Asset values, including property, remain at pre-crash levels and there is continuing slack in the Irish labour market, whereas the UK’s unemployment rate is back down to pre-crisis levels. Household savings are at historic lows and asset prices are seen to be overvalued.