Be prepared for greater Euro/Sterling exchange rate volatility
An increasingly volatile Euro/Sterling exchange rate could be one of the most immediate impacts of the UK’s decision to trigger Article 50 of the Lisbon Treaty, according to IBEC Director of Policy and Public Affairs Fergal O’Brien. He was speaking at a recent Brexit conference in Belfast.
“This may well be the case,” he explained, “once the issue of the UK’s divorce settlement comes up for discussion.”
Only one in four Irish companies hedge against Euro/Sterling currency movements at the present time. This figure may well increase during the period ahead.
O’Brien pointed out that, since the Brexit referendum result, Sterling has fallen by 18% against the Euro.
“This fall in Sterling will both increase the cost of Irish goods going into the UK and mean increased competition on Irish shelves from British products. It will drive retail activity of Irish consumers cross-border and online.
“Exchange rate volatility has occured before. This time is different, however. Previous bouts of Sterling weakness were cyclical; these recent changes represent a structural change in the strength of the currency.
A weak Sterling may be the new norm facing Irish business.
O’Brien highlighted recent unifying trends that have become apparent within the island of Ireland’s economy over recent years.
“This is particularly the case where agri-food is concerned. It is a process that is delivering enhanced wealth opportunities to both parts of the island. The maintenance of this momentum must be maintained as part of the final Brexit deal. This all-island market is delivering real prosperity for citizens for Ireland as a whole.”
O’Brien said that cross-border tariff barriers must be avoided at all costs.
“Preserving the common travel area is absolutely crucial. The UK and Ireland are unique in having a common labour market. This must also be maintained post-Brexit.”
On the up side, the IBEC representative said that the Irish economy was confronting the overall Brexit challenge from a position of inherent strength.