The uncertainty surrounding sterling is creating challenges for some Irish food and drink exporters who are already battling with soaring energy costs, according to Bord Bia.
The value of sterling fell sharply earlier this week and then rebounded as markets remain jittery over comments made by Bank of England governor Andrew Bailey in relation to ending emergency supports.
Irish food and drink exporters will be watching closely for any further indication of where the pound may be headed as a fall in the value of sterling against the euro could make their exports less competitive in the UK compared to domestic producers.
According to Bord Bia in general, Irish food and drink exporters have been able to “maintain and in many cases grow their exports” at sterling rates in the 80s and low 90s in recent years.
Competitiveness challenges in UK
But Bord Bia has also indicated that exporters believe that if the exchange rate was to settle in the mid-to-high 90s, this would present “a significant competitiveness challenge in the UK market”.
In a statement, Bord Bia said: “For those companies, especially in the added-value prepared-consumer-foods sector, who are importing a lot of their inputs and raw materials from the UK, a fall in sterling can represent a reduction in their raw material costs, which may offset some of the loss of currency-related competitiveness.
“However, this very much varies from sector to sector and company to company in terms of their supply chain set-up.”
Bord Bia said currency concerns are the latest challenge for Irish exporters who are already dealing with “soaring energy costs, which are being exacerbated by multiple geo-political forces and the current strength of the dollar, the currency in which oil and gas are traded”.
Pressures being felt in supply chain
The organisation said it is working closely with Irish food, drink and horticulture companies, trade customers and consumers “to help alleviate some of the pressure being felt across the supply chain”.
According to latest Bord Bia figures, Irish food and drink exports to the UK have remained “remarkably resilient” over the past four years despite the double impact of Brexit and Covid-19.
It said: ”Irish food and drink exports to the UK actually grew by 3% between 2017 and 2021, rising from €4.347 billion to €4.461 billion.
“The 2022 value figure is likely to be much higher due to inflation and rising producer prices when full 2022 figures are released in early 2023.”