Sterling weakens as Brexit draws closer
Sterling has weakened further since the UK Prime Minister, Theresa May, announced that she would trigger Article 50, the first step in divorce proceeding from the European Union before the end of March 2017.
The UK leader made the announcement yesterday, when she said there will be no unnecessary delays in invoking the legislation to see the UK leave the EU.
Currency markets have reacted to the announcement, with the value of the Sterling against the euro falling by more than 1%, with one euro now buying 87p Sterling. On Friday last week, one euro bought 86.1p.
Commentators have suggested that the terms negotiated in the exit package will be a key driver for Sterling going forward, but it is likely to be in for a rough ride over the next couple of months.
Impact of a weaker Sterling
The UK is by far the largest trading partner for Ireland.
According to the Central Statistics Office, in 2015 Ireland exported almost €5.1 billion worth of agricultural products and Irish imports from the UK were worth €3.8 billion.
The strength of the British pound had driven strong prices at a time when prices have been quite weak in the rest of Europe, particularly in respect of beef last year.
Consequently, with half of its beef exports going there, the UK is Ireland’s biggest beef market by far. If the pound is strong, it makes us highly price-competitive.
However, a weaker Sterling would lead to competitiveness problems for both beef and dairy prices.
Figures from Bord Bia show that the UK accounts for 54% of Irish beef exports and for 28% of Irish sheepmeat shipments.
Effects of the weaker Sterling have already been seen in the Irish beef trade, with the volume of Irish beef and live cattle exports falling since the result of the Brexit referendum became known.
In July, the month following the Brexit vote, the volume of Irish beef sold into the UK market declined by 20% compared to the corresponding time in 2015.