Irish exporters may have to battle further falls in sterling as the Brexit crisis drags on, one expert has warned as the British pound plunged against the euro.
Sterling abruptly dropped to a two-year low against the euro in mid-afternoon action in London, after a Financial Times report that British prime minister Boris Johnson would hold a general election in the "days after" the UK is due to leave the EU on October 31st if he loses a likely confidence vote in parliament.
Sterling slid as low as 92.07p on Thursday, drawing back to hover around 92.13p with a 0.12 per cent fall from the previous day’s trading. August traditionally shows light trading as many are on holiday, which often makes for bigger moves than normal.
Economist Alan McQuaid said that sterling could weaken further as the row over the UK’s departure from the EU continued.
“I don’t think it will reach parity, as the euro has problems of its own, but it could go 95 or 98 pence,” he warned.
Thursday’s lows brought the euro to around 92.35 pence in the pound. Sterling’s weakness hits Irish exporters’ competitiveness, as it drives up the price of the goods and services they sell.
Agri-food
Joe Healy, Irish Farmers' Association president, whose industry is among the biggest exporters to the UK, warned that sterling's collapse was having serious repercussions for agri-food.
“The value of sterling has dropped over 30 per cent since the Brexit vote. This is having a huge impact on the competitiveness of our exports. These pressures are all being pushed back down on farmers,” he said.
Mr Healy stressed that farmers face immediate problems. He pointed out that a recent €100 million support fund for beef producers only covered the period to May 12th, while losses have mounted since then.
“The EU Commission and the Government need to come on the pitch with aid for losses since May 12th and a €1 billion package to support the beef market and provide direct aid to farmers,” he said.
Thursday’s sterling level was the lowest since August 2017. The pound has fallen more than 5 per cent since May 1st against the euro.
Sterling briefly fell as low as $1.2094 against the dollar before recovering slightly to trade 0.1 per cent lower at $1.2120.
Mr Johnson would hold a general election “days after” the UK is due to leave the EU on October 31st, should there be a successful parliamentary no-confidence vote in his government, senior aides to the prime minister have said.
“We can’t stop them forcing an election but we control the timetable so we will force the date after October 31st,” said a senior Downing Street official. “If there must be a general election, then it will be days after October 31st.”
Another close aide to Mr Johnson did not deny that any election would be held in the first few days of November. – Copyright The Financial Times Limited 2019
