Irish jobs are already under threat as the UK prepares to embark on its exit from the European Union, as business group Ibec points to a "full-blown currency crisis" and says "an urgent, targeted national response is essential".
“This is now a full-blown currency crisis. For exporters, the speed of sterling’s decline is on a par with the 1992 currency crisis. Irish exporters to the UK are already 15 per cent less competitive and things could get much worse.
“The problem demands urgent government attention,” Ibec director of policy Fergal O’Brien said, adding that without such action, “hundreds of millions of euro worth of exports and thousands of Irish jobs will be lost”.
Sterling weakened against the dollar again on Monday, as a manufacturing sector survey brought more worrying signs on the economy.
The UK manufacturing purchasing managers’ index (PMI), published by Markit , fell to 48.2 in July, down from an initial estimate of 49.1 - any figure below 50 indicates a contraction in activity.
Moreover, the possibility of the Bank of England cutting base rates below those in the United States for the first time in a decade, may weigh on the currency into Thursday’s decision.
A survey by Ibec of over 450 Irish businesses highlights the intense currency strain on exporters following the UK vote, with almost half of respondents (45%) identifying the sharp fall in the value of sterling as the main threat.
Cheaper UK imports was cited as the biggest risk by one third of respondents (33%), while just one in ten (9%) of businesses have Brexit contingency plans already in place.
Only one in four exporters (24%) have currency hedging arrangements in place and, for many, this protection will expire over the coming weeks and months
‘Urgent response’
Ibec says an “urgent and meaningful Government response” is needed to address the immediate currency crisis and longer-term competitiveness challenge that Brexit poses.
Such a package should include an enterprise stabilisation and employment support fund available to the worst affected firms; an ongoing focus on cost competitiveness in areas such as labour costs and the minimum wage; a concerted drive to secure exemptions to EU state aid restrictions to allow the Irish government to match grant aids which will be available to UK based manufacturers; and a fully ‘Brexit-proofed’ Budget which will address tax competitiveness challenges against the UK and facilitate Ireland to take advantage of any FDI opportunities which will arise.
