Cliff Taylor: Boris pounds sterling, so what does it mean for Ireland

Sterling is on the slide as Boris Johnson’s intervention finally galvanised market focus on the possibility of Brexit and the risks it might bring.

It has lost most ground against the US dollar, down almost 2 per cent today, but, of more concern to Ireland, sterling has also dropping against the euro, thought it did recoup some ground late yesterday.

This has implications for Ireland. A rock bottom sterling, which traded under 70p to one euro last July and again in November , has now risen to close to 78p – and may keep on going as the Brexit poll approaches. At one stage yesterday the euro rose to 78.4p sterling, though signs of weak growth in Europe lead to it easing in later trading . The key factor now is how fears of Brexit play off against concerns about weak European growth on the currency markets in the weeks ahead.

Sterling is under pressure as investors fear that Brexit could interrupt trade or investment flows for a period - and also be a net disadvantage to Britain’s growth prospects.

While currency forecasting is a notoriously tricky business , many analysts feel a period of nervous trading for sterling lies ahead,even if weak growth prospects for the euro zone could mean it loses more against other currencies, such as the US dollar.

Irish exporters

A weaker sterling will hit Irish exporters selling into the UK. The UK accounts for some 14 per cent of total goods exports, but it is a lot more important for Irish-owned companies, accounting for over a third of the exports of companies supported by Enterprise Ireland. A stronger euro makes life harder for these exporters, hitting their profit margins. Among the companies affected would be food and dairy exporters and construction and engineering firms.

On the other side of the ledger, Ireland is a major importer from the UK and goods coming in should now be cheaper, provided sterling’s fall is maintained. While pricing often would not adjust by retailers for small changes, the steady fall since the sub 70p November low is now significant.Your weekend in London or Belfast may feel a bit cheaper, while British tourists here will feel bit poorer.

Perhaps more important that these short-term impact is the longer-term question of what happens if Britain leaves and what implications this has for Ireland. Much would depend on the terms on which Britain left and what trade agreements it reached with the EU and with Ireland.

The ESRI has warned that in a worst case scenario Irish exports to the UK could fall by a fifth, while the reimposition of Border controls would add to business costs. Ireland imports more from the UK than we export, and the cost of these imports could rise depending on what trade agreements were reached.

There are a host of “ifs” and “buts” here. The reality is that nobody knows on what terms a country would leave the EU - but with €1 billion in trade flows between the UK and Ireland each week, the answer to this would be vital for Ireland.