Irish exporters to grapple with sterling weakness

Irish exporters to Britain face headwinds from a sterling drop against the euro and the prospect of an economic slowdown in the UK after voters there shocked financial markets by opting to leave the EU after more than four decades.

Sterling fell more than 10 per cent to as low as $1.3229 in early trading but has since rallied off its lows, to $1.3730.

Enterprise Ireland said on Friday that the UK’s vote would present significant new challenges for exporters.

The organisation announced plans to help companies maintain their UK presence while also diversifying into other international markets.

Enterprise Ireland advised that in the immediate term, the key impact on Irish exporters is likely to be around exchange rate volatility and that companies as a first step should seek financial advice relating to hedging and managing associated risks. It also said that it would be intensifying its efforts to support companies respond to the new situation and implement medium term market diversification plans.

“Ireland is a strong, open and competitive economy and while the result will pose challenges for Irish exporters, now that it is known, we will move forward and implement plans to help our client companies deal with the impacts,” said Enterprise Ireland chief executive Julie Sinnamon.

Davy economist Conall Mac Coille warned that exporters should expect to see a sharp depreciation of sterling and weaker UK demand. However, he said they should eventually be able to "push through price rises as sterling's depreciation contributes to a broader rise in UK consumer price inflation."

Mr Mac Coille said the “shock to consumer and business confidence is impossible to quantify.”

The vote sets the UK up for a period of bitter negotiations with the EU on the terms under which it will extricate itself from the union. It may also fan speculation that more countries will seek to withdraw from the EU, as the UK referendum outcome shows how disillusioned western voters have become with the political establishment.

“Political developments are now key,” said Mr Mac Coille. “The optimistic scenario is that the UK government begins an orderly exit period, extending beyond the two years envisaged under the Lisbon Treaty to allow trade negotiations [to be concluded]. That’s probably the most important consideration for the Irish government now.”