A combination of the strength of sterling against the euro and high prices in UK compared with other EU countries has resulted in new cars becoming one of the Republic of Ireland's biggest exports to Northern Ireland, even though cars are not manufactured in this State. The fall in the pound against sterling has prompted a huge increase in car imports from the Republic over the last two years or so. Sales of imported cars from the Republic now comprise 22 per cent of the Northern Ireland car market, according to the Retail Motor Industry Federation (Northern Ireland). This is nearly double the market share held two years ago before the introduction of the euro.

While the strength of sterling has been a major factor in boosting the rate of car imports to Great Britain and Northern Ireland, comparisons of pre-tax car prices across EU member-states show that the UK prices have been very close to the top of the table.

The British government recently issued an order to open up the new car market in response to a damning report by the UK Competition Authority. Car manufacturers have until December 1st next to comply fully with the government order to stamp out uncompetitive practices, which include offering fleet discounts to ordinary dealers.

Although car prices fell by almost 5 per cent in July, the UK Department of Trade and Industry believes they should fall further. Earlier this summer, the Competition Authority said UK new car prices were on average 10-12 per cent higher than elsewhere in the European Union. Figures on new car prices from the European Commission suggest that Irish pre-tax car prices are around the EU average.

Based on the latest comparison of new car prices in the European Union from May 2000, and using the example of Ford, which has not yet discounted its prices, a Northern Ireland customer going to a dealer in the Republic and buying a Ford Focus would have paid £8,700 (€11,047). The pre-tax price in the UK was £8,829 sterling (€15,238), meaning that the Northern customer would have saved just over £2,400 sterling (€4,191) on the pre-tax price.

Once converted to sterling, the Irish invoice price and the costs of insurance and transport back to Northern Ireland are calculated for VAT at 17.5 per cent. Although there are no concrete statistics, the Society of the Irish Motor Industry estimates that 30,000 new cars have been sold both to British and Northern Ireland consumers in the past year.